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Joseph Cotterill

It’s Lee Buchheit’s world, we just get to live in it

Posted by Joseph Cotterill on May 23 23:00. Comment .

Thank you, Reuters.
We’ve long been admirers of Lee Buchheit, who helped mastermind the Greek restructuring at Cleary Gottlieb.
See Buchheit’s early co-authored proposals for Greece, or his succinct advice last year to the Europeans on restructuring sovereign debt. Buchheit’s brainchild of using retroactive collection action clauses to ‘mop up’ Greek-law bondholders will be hotly debated for a long time to come. Its ramifications for eurozone bond markets, which already face the influx of collective action clauses next year, remain unclear.
Buchheit at least has a game take on what it all means:
“The question is, Is it an intolerable precedent?” he said. “The official sector knew that retroactive legislative change to local law bonds was a thermonuclear weapon,” he said, hoping history will judge it the “mildest, most mature and moderate use of that weapon.”
That’s the other thing about Buchheit. He is very, very, very quotable:
The ECB acted “with the mentality of a six-year-old boy who gets it into his head that demons lurk just beyond his bedcovers in a dark bedroom. Panic grows with every hour,” Buchheit said.
“I find it hard to imagine they will now man up to the proposition that they delayed – at appalling cost to Greece, its creditors and its official sector sponsors – an essential debt restructuring because they simply failed to understand the dynamics of the CDS market,” Buchheit said, referring to credit default swaps, which are used by investors to protect themselves against defaults.
Lorenzo Bini Smaghi’s reaction (in the Reuters piece) is interesting.
Related link:
A proper debt restructuring – FT Alphaville