If you continue to dig, you`ll find it in the definition of “waiting” in the FAA Definitions section. The disposition of the Republic, a department, ministry or agency of the Republic and enterprises, trusts or financial institutions or other entities owned or under the control of the Government, holds notes. Unfortunately, for the Lebanese government, this is a fairly broad provision when it comes to disenfranchy. It seems out of the question that the central bank will vote in favour of restructuring and could be interpreted as depriving even some commercial banks of their rights. However, bondholders risk taking legal action against Lebanon in the event of a failure of an agreement, or even in the event of unilateral default. The base prospectus recognizes the courts of the State of New York and the Federal Court based in the City of New York, Borough Manhattan, non-exclusive jurisdiction to settle disputes arising out of such obligations. The Lebanese courts also have jurisdiction. The enforcement of a foreign judgment in Lebanon requires compliance with certain conditions laid down in the applicable Lebanese legislation through a so-called exequatur procedure. Although there has been no conventional introduction of collective action clauses (CACs) that generally allow for the restructuring of securities in several classes, the Lebanese government could nevertheless attempt to reach an agreement with bondholders holding at least 75% of the total amount of bonds, at a duly convened meeting on debt restructuring and restructuring. After trying to find the budget agency agreements that underpin Lebanese bond issues, we finally managed to get our hands on them. We hoped that the FAA would clarify the respective legal positions of the Lebanese government and its investors. No no. Our review of the FAA makes us scratch our heads.
The original contract dates from 1999 — it`s the 2010 3d amended version — and was one of the first bonds issued under New York law after the Brady era that contained a class action clause. We were eager to see it and had even heard that it had been carefully designed to minimise the risk of holdouts in the event of restructuring. Certainly, the government has reason to fear holdouts like london-based hedge fund Ashmore. The poorly written FAA shows why countries must always conclude these agreements in the awareness of the possibility of default. One of the main mistakes of the Lebanese FAA is the determination of rights. National central banks and commercial banks would likely be among the friendliest creditors, so their disenfrancising serves to strengthen more aggressive creditors.