Why introduce single-limb CACs?

Single-limb CACs are meant to address the problem of so-called holdout investors. Holdout investors in bonds can act strategically to take advantage of the problem a country faces and therefore deepen the crisis. In the past, certain firms have specialised in distressed sovereign debt by purchasing sovereign bonds at steep discounts. They then resisted any change of the terms of the bonds with the intent of subsequently litigating to get paid back in full, most of the time at the expense of the other bondholders. This strategy is feasible if the holdout investor can buy enough bonds to form a blocking minority in a restructuring vote. This is much easier if the voting system requires a majority within each “series”.

Single limb CACs address the described problem in the current voting system.

Research suggests that the change will not have a meaningful market impact on sovereign bonds.