SOVEREIGN DEBT: A NEW WAVE OF RESTRUCTURING The EU Framework

Download SOVEREIGN DEBT: A NEW WAVE OF RESTRUCTURING The EU Framework

Post on 23-Feb-2016

34 views

Category:

Documents

0 download

Embed Size (px)

DESCRIPTION

SOVEREIGN DEBT: A NEW WAVE OF RESTRUCTURING The EU Framework. Dubai October 31, 2011 Antoine Maffei. Available debt restructuring support? The European Financial Stabilization Mechanism ( EFSM ) The European Financial Stability Facility ( EFSF ) - PowerPoint PPT Presentation

TRANSCRIPT

111031_IBA Annual Congress_Finance Section_Sovereign Debt A New Wave of Restructuring_The EU Framework

SOVEREIGN DEBT: A NEW WAVE OF RESTRUCTURING

The EU FrameworkDubai October 31, 2011Antoine Maffei De Pardieu Brocas Maffei A.A.R.P.I.Available debt restructuring support?The European Financial Stabilization Mechanism (EFSM)The European Financial Stability Facility (EFSF)The Treaty establishing the European Stability Mechanism (ESM)

Together with: International Monetary Fund (IMF) Support; and Where appropriate European Central Bank Support

1De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Decisions to create the EFSM and the EFSF:European Council of May 9, 2010EFSM:is based on Article 122.2 of the Treaty on the Functioning of the European Union (TFEU), inducing financial support for Member States (MS) in difficulties or seriously threatened with severe difficulties caused by exceptional circumstances beyond MS controlActivation:subject to strict conditionalityin the context of a joint EU/IMF support on terms and conditions similar to the IMFGoverning instrument: Council Regulation (EU) n407/2010 of May 11, 2010 establishing a European Financial Stabilization Mechanism (the EFSM Regulation)

2De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.The EFSM Regulation:

Establishes conditions and procedures under which EU financial assistance may be granted to a MS experiencing or threatened with, severe economic or financial disturbances caused by exceptional circumstances beyond its control taking into account possible application of balance of payment regulation (EC n332/2002 of February 18, 2002)Form of assistance : loan or credit line to MSAmount limited to margin applicable under own resources ceiling for payment appropriations (about Euro 60 billion plus about Euro 35 billion under the Balance of Payment Facility)

3De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Procedure under the EFSM regulation:To discuss with the EU Commission (EC) in liaison with ECB assessment of financial needsTo submit a draft economic and financial adjustment programDecision of Council by qualified majorityTo conclude a MOU with the EC

Where financing outside EU is sought, including from IMF in connection with the EFSM process:The MS shall first consult the ECThe EC shall examine the availability under the EU financial assistance facility and compatibility of economic policy conditions with commitments of MS for implementation of Council recommendations and decisions

4De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.The EFSF:

Is part of the package organized by the May 9, 2010 decision of the European Council held on that dateIts purpose is: To provide financial support to Euro Area Member States (EAMS) in difficultiesCaused by exceptional circumstances beyond such EAMS controlAiming at safeguarding financial stability of the Euro Area as a whole and of its Member StatesFinancial support to be provided to EAMS by EFSF in conjunction with the IMF

5De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.THE EFSF:

Incorporated on June 7, 2010 as a Luxembourg Company (Socit Anonyme)Concluded on June 7, 2010 an EFSF Framework Agreement (Agreement) with 16 EAMSThe Agreement was amended in July 2011 to reflect decisions of EAMS taken on March 11, 2011 and further amended to reflect decisions taken on July 21, 2011Tenure 3 years through June 2013

6De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Purpose of EFSF - to provide stability support to EAMS through:

Loan facility agreements (in their original format)Financial assistance facility agreements to provide financial assistance by way of:Facilities for the purchase of bonds in the primary market (since March 11, 2011 council meeting)Loan disbursementsPrecautionary facilities (since July 21, 2011 Council meeting)Facilities to finance the recapitalization of financial institutions in EAMS through loans to the governments of such MS including in non-program countries (7/21/2011)Facilities for the purchase of bonds in the secondary market on the basis of an ECB analysis recognizing the existence of exceptional financial market circumstances and risk to financial stability (7/21/2011)

7De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Funding of EFSF:Financial assistance to be provided by EFSF, to be funded by issuing or entering into:Bonds NotesCommercial paperDebt securitiesOther financing arrangementsAll backed by the irrevocable and unconditional guarantees of each of the EAMS (other than the EAMS which is or has become a Stepping Out Guarantor prior to the issue of such instruments (other than in respect of an undrawn or unutilized precautionary facility, facility to refinance financial institutions or a facility to purchase bonds in the secondary market))

8De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Amount of Guarantee (1): In respect of each Guarantor the Guaranteed Amount is equal to:The product of the related Contribution Key multiplied by 165% (Over-Guarantee percentage) and the obligations of EFSF (principal, interest or other due amounts) in respect of Funding InstrumentsList of Guarantee Commitments:

CountryECB Capital subscription key %Contribution keyGuarantee Commitment EUR (millions)Kingdom of Belgium 2.42563.4666% 27,031.99 Federal Republic of Germany 18.937327.0647% 211,045.90 Republic of Estonia0.17900.2558% 1,994.86 Ireland 1.11071.5874% 12,378.15 Hellenic Republic1.96492.8082% 21,897.74 Kingdom of Spain 8.304011.8679% 92,543.56 French Republic 14.221220.3246% 158,487.53 9De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Amount of Guarantee (2):

That percentage or Over-Guarantee percentage was 120% prior to entry into force of September 2011 Amendments of the Agreement

CountryECB Capital subscription key %Contribution keyGuarantee Commitment EUR (millions)

Italian Republic 12.496617.8598% 139,267.81 Republic of Cyprus 0.13690.1957% 1,525.68 Grand Duchy of Luxembourg 0.17470.2497% 1,964.94 Republic of Malta 0.06320.0903% 704.33 Kingdom of the Netherlands 3.98825.6998% 44,446.32 Republic of Austria 1.94172.7750% 21,639.19 Portuguese Republic 1.75042.5016% 19,507.26 Republic of Slovenia 0.32880.4699% 3,664.30 Slovak Republic 0.69340.9910% 7,727.57 Republic of Finland 1.25391.7920%13.904,03Total69.9705100.0000%779.783,1410De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Amount of Guarantees (3):

The Aggregate Guaranteed Amount or Guarantee Commitment is 165% of Euro 440 Billion or Euro 770 Billion leaving an amount available for lending of Euro 440 billion The over guarantee percentage is set in such a manner that the available amount is fully covered by triple A rated EAMS guaranteesTotal maximum available amounts are:In respect of EFSM:Euro 60 BillionIn respect of EFSF:Euro 440 BillionRelated IMF Facility:Euro 250 BillionTotal:Euro 750 Billion

11De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Amount of Guarantees (4): At the end of the July 21, 2011 Council meeting the Euro Area Heads of States decided to lengthen maturities (Tab.1) and lower interest rates of EFSF loans (Tab.2).Table 1.: Length of Maturity

Source: French Economy, Industry and Employment Ministry*Stand-By Arrangements (Loan to Greece); ** Extended Fund Facility (Loans to Ireland and Portugal) Redemption clauses are contemplated where the States are able to redeem earlierEFSF - after July 21, 2011EFSF - before July 21, 2011EFSMIMFAverage MaturityNot determined7,5 years7,5 years maximum4*/7,5** yearsMaximum Maturity30 years15 yearsNot determined5*/10** yearsMaximum Grace Period10 yearsnot systematicalnot systematical3,25*/4,5** years12De Pardieu Brocas Maffei A.A.R.P.I. 57 avenue dIna CS 11610 75773 Paris Cedex 16 T: +33 (0)1 53 57 71 71 F: +33 (0)1 53 57 71 70 www.de-pardieu.com De Pardieu Brocas Maffei A.A.R.P.I.Amount of Guarantees (5):

Table 2.: Interest

Source: French Economy, Industry and Employment MinistryApplicable rate for first 3 yearsStep-up after 3 yearsEFSF - before July 21, 2011

EFSF Cost of Funding + 200 bp+ 100 bpEFSF - after July 21, 2011EFSF Cost of Funding + 50 bp0 bpEFSMEFSM Cost of Funding + 200 bp+ 100 bpIMFSDR rate + 100 bp + 200 bp (applicable to the amount of the facility in excess of 300% of IMF quota)+ 100 bp

13De Pardieu Brocas Maffei A.A.R.P.I.

Recommended

View more >