BRAZIL'S $1 BILLION BOND issue at the end of
April took the markets by storm. The timing and the pricing
were nigh-on perfect: the most difficult part of the deal was
deciding how many bonds each of the 430 participants in the
over-$7 billion order book was going to get. So it was with
some surprise that Euromoney picked up the telephone the
following morning only to hear a string of fluent invective
aimed at Brazil and its advisers. "Testicular weakness" was
one of the more memorable phrases used.
The caller was from the official sector, but was not part of
some zealous minority at the IMF. In fact, many private-sector
observers took a similar view.
The problem was simple: why had Brazil issued bonds with 85%
collective action clauses, or CACs? Everybody had assumed, before
Brazil came to market, that not only were CACs here to stay but
that the market...
