United Kingdom's HM Treasury backs London Coalition publication of pause clauses and a restructuring guide to speed sovereign debt crisis resolutions

HM Treasury announced that the London Coalition on Sustainable Sovereign Debt has published two voluntary, private sector tools aimed at making sovereign debt crisis negotiations faster and more predictable for developing countries, with the intention of reducing the economic damage from prolonged debt distress and uncertainty for UK investors and businesses with emerging market exposure. The London Coalition Secretariat released a Pause Clause Proposal and Term Sheet for sovereign bonds, developed by international bondholders, to allow countries hit by major shocks to temporarily defer debt payments on a clear, time-bound basis, building on precedents in Barbados and Grenada and intended to sit alongside stronger debt transparency. It also published an Implementation Guide for Restructuring Private Sector Sovereign Loans, developed by commercial lenders, as a practical reference for organising creditor engagement and streamlining discussions. Both documents were developed through iterative discussions with developing country borrowers, investors, official sector stakeholders, rating agencies and other market participants, and the pause clause approach draws on the UK’s experience with Natural Disaster Clauses in UK Export Finance lending. Work will continue through consultation with developing countries to support uptake of the pause clauses and broader use of the tools.