Bloomberg News

HSBC’s Gray Supports EU Institution of Collective Action Clauses

May 25, 2012

Robert Gray, chairman of debt management and advisory at HSBC Holdings Plc, said the European Union’s decision that sovereign bond issuers should include collective action clauses in terms of their debt is positive.

Collective action clauses, introduced retroactively into Greece’s local-law debt by the country’s parliament, allow a set majority of bondholders to force through terms of a restructuring.

He was speaking at the International Capital Markets Association conference in Milan.

On collective action clauses:

“ICMA likes collective action clauses -- in fact we love them -- and we are delighted to see the euro zone adopt them because they are basically a rejection by the euro zone of the idea that sovereign debt should be restructured in a statutory- type form. We like them because they’re voluntary and they’re market based.

“Once we have these clauses, will governments actually use them when they face the challenge of debt restructuring? Of course, in the Greek case one of the virtues of the use of these clauses was that they triggered credit-default swaps.

“I have to say that was a tremendously important validation of the CDS market for member firms of this association.”

On preferred creditor status claimed by central banks:

“I do question whether preferred status should be given to any bonds when they’ve been purchased on the secondary market rather than representing new funds for the sovereign debtor.”

On the need for transparency:

“We don’t oppose the use of local-law bonds but we do believe the protections should be conformed between the debtor’s local-law bonds and its international-law bonds.

“It must become easier to get your hands on the terms and conditions of local-law sovereign bonds. In particular, we recommend that all sovereigns should include on their websites, in the English language, the terms and conditions of all their outstanding local-law bond issues.

To contact the reporter on this story: John Glover in London at

To contact the editor responsible for this story: Paul Armstrong at

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