EU publishes mandatory Collective Action Clause for use in eurozone sovereign bonds from 1 January 2013
In February 2012, eurozone member states signed a modified version of the Treaty Establishing the European Stability Mechanism. Amongst other things, this treaty provides for the mandatory inclusion of standardised and identical Collective Action Clauses (“CACs”) in all new eurozone sovereign bonds from 1 January 2013. A sub-committee of the Economic and Financial Committee on EU Sovereign Debt Markets (the “Committee”) developed the terms of this mandatory collective action clause which was published on 26 March 2012 (the “Model CAC”).
As a result, from 1 January 2013, eurozone sovereigns will be obliged to include the Model CAC in bonds with a maturity of greater than one year, irrespective of their governing law. The Model CAC will apply to both international and domestic issues, regardless of whether the security is listed, traded or privately placed.
In this note we look at the terms of the Model CAC and how they differ in a number of respects from the ICMA CAC. One of the significant differences is that the Model CAC provides that modifications may be made either to a single series or to more than one series of bonds (a “cross-series modification”).
Click here to read more information on CACs