End of the line for exit consents?
If there is one thing that emerging-market investors hate as much as SDRM, it is exit consents.
One of the biggest selling points for CACs is that they obviate the need for exit consents, which are pretty much the only way of restructuring bonds now.
Agustín Carstens, Mexico's undersecretary of finance, says that "we basically have given up the possibility of doing a rescheduling through exit consents". This is a view shared by the lead managers of Mexico's new bond, as well as by the country's lawyers.
Ed Bartholomew, JPMorgan's resident expert on sovereign debt restructuring, says: "The quid pro quo is to give up the exit consents - you don't need the back door, because you've got the front door."
But exit consents have significance beyond debt restructuring. There is nothing in the bond about giving up exit consents and in fact if Mexico wanted, it is now in a position to structure much more coercive exit consents than anything that was possible under its old bonds.
Exit consents have historically taken advantage of the fact that rather important non-payment clauses in global bonds can be changed with the consent of a majority (usually 66%) of bondholders.