@techreport{NBERw7458,
 title = "Would Collective Action Clauses Raise Borrowing Costs?",
 author = "Barry Eichengreen and Ashoka Mody",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "7458",
 year = "2000",
 month = "January",
 URL = "http://www.nber.org/papers/w7458",
 abstract = {We examine the implications for borrowing costs of including collective-action clauses in loan contracts.  For a sample of some 2,000 international bonds, we compare the spreads on bonds subject to UK governing law, which typically include collective-action clauses, with spreads on bonds subject to US law, which do not.  Contrary to the assertions of some market participants, we find that collective-action clauses in fact reduce the cost of borrowing for more credit-worthy issuers, who appear to benefit from the ability to avail themselves of an orderly restructuring process.  In contrast, less credit-worthy issuers pay, if anything, higher spreads.  We conjecture that for less credit-worthy borrowers the advantages of orderly restructuring are offset by the moral hazard and default risk associated with the presence of renegotiation-friendly loan provisions.},
}