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Why Are Those Lebanese Fiscal Agency Agreements So Hard to Find?

posted by Mitu Gulati

Often, the final assignment in my sovereign debt finance class is for the students to try and design a restructuring plan for whatever sovereign is in crisis that year.  This year, we have a number of available candidates: Argentina, Lebanon, Venezuela, Italy(?).

A crucial part of the assignment is for the students to figure out what the relevant contractual documents are that they need to delve into.  There are some students who fail to realize until the end of the term that the offering circulars and prospectus supplements are not in fact the relevant contractual documents and, at best, contain summaries of some of the relevant terms.  To the extent that the language of the offering documents is inconsistent with that in the actual contracts, and the students fail to see this, it can be a disaster – as Andrea Kropp’s excellent forthcoming article “Restructuring Italy’s New York Law Bonds” explains (here).

The majority of students though do figure out that they need the relevant trust indentures or fiscal agency agreements to be able to design a plausible restructuring plan.  The question then is how to find those documents. And that is often not easy. Now, as a matter of pedagogy, I think it is good for the students to learn how to use the various databases such as Bloomberg, Thomson One Banker, Filings Expert, Dealogic and so on to find key financial and legal data.  Enterprising law students often also find other sources, such as the websites of the ministries of finance and the databases of the various exchanges on which these documents are listed. 

Finding these elusive documents is a skill that was invaluable for me at my law firm eons ago because most of the other associates had no clue as to how to find these financial documents (law schools certainly didn't provide training in how to dig up financial contracts). But these above mentioned sources, while providing a good start, rarely have the actual contracts. Instead, what they provide are the sales documents that, at best, contain summaries of the key terms.  And, as noted, those summaries can sometimes be very wrong from a legal perspective because for us the specific wording of clauses can be especially important. 

So, should the public expect for these documents to be readily accessible? I think so. These are the debt contracts of sovereign issuers, often for many billions of dollars that taxpayers are on the hook to repay. One would think that their terms would be a matter of public record so that the public can see what sorts of preparations the governments have made to handle the eventuality of a debt restructuring (in Lebanon’s case, I worry that the answer might be: precious few).  Yet, the reality is that it can sometimes be very difficult – near impossible in some cases – to dig up this stuff. And I’m finding that Lebanon is a prime example.  Indeed, the sales documents for Lebanon's sovereign debt are particularly obtuse in terms of having buried much of the crucial information in the Fiscal Agency Agreement, which no one seems to be able to get access to unless one is an actual holder of the bonds who is willing to show up at the Fiscal Agent's office in Luxembourg or something else altogether ridiculous.  Now, there are ways to figure this stuff out, which my students inevitably do. But why make this exercise so difficult when what we are talking about are public debt documents?

Maybe my friends at the IMF and World Bank will remedy this problem as part of the various "transparency" initiatives they periodically trot out at fancy conferences on the beach in Mauritius, Bali or the Seychelles. But right now, today, I'm willing to bet that they themselves don't have the relevant Lebanese Fiscal Agency Agreements.  At least the unnamed person from one of these institutions who just emailed me to ask whether my students had been able to dig up the Lebanese documents didn't have a clue as to how to find them. I was so very tempted to ask him, in response to his question, how his last transparency initiative conference on whatever beach had gone (he'd have likely responded: "Wonderfully! Pity you couldn't make it").

Aiyiyiyi

Comments

I have been on the hunt for Lebanon's expropriation bond contracts (e.g. https://dl.bourse.lu/dl?v=UnrXLwWkFjHbXkGba5O1J4bSFCNiWlmkcDx526l3ousUFUzGjEWoxTVDZJVaCxf2t1/4+nlp+NqwrT3pEUOxIbkvh1kbTHfbtHguD5Mjtqmt2Iw7tuMDK3qDiU/FGRZ80LNzdQqVdVdG0/Ul9ajEdGU++9GVx0vSV2KRCtdbpzA= page 102, footnote 6) which is trading like it will definitely be paid (or not trading, rather, it is very small and doubt you can buy them) but there is very little information about them.

Will be interesting to see if they are just paid while defaults on others. But can't find anything.

This reminds me of the situation with US mortgage securitization--it is hit or miss whether a deal's documents will be on Edgar. I don't think it's a matter of whether it was a 144A deal or not--—prior to 2008, 144A mortgage securitizations were rare (now they all are 144A, which avoids Reg AB II disclosures).

I agree with that documents like trust indentures should be readily available to the public to read. I think, in some ways, their unavailability reflects an elite belief (by powerful people within the government and the wealthy investment banks and investors that facilitate their borrowing) that the important parties in the agreement are not the people who supposedly benefit from these borrowings, but the elites themselves. We can observe this phenomenon in the US in the way fiscal and monetary policy routinely reflects the interests of the business community, not the ordinary people who comprise most of the electorate.

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