Abstract
To restructure its debt, the Republic of Lebanon should conduct an exchange offer that transfers existing bonds into the hands of a fiduciary agent that is contractually bound to block any attempts to accelerate the debt by non-participating creditors. The exchange offer should also solicit consent to modify the forum selection clause in the old bonds, making Lebanon the exclusive forum for adjudicating disputes. Simultaneously, the Republic should clarify a crucial inconsistency in the Republic’s 2010 Fiscal Agency Agreement. Under Condition 15(a) of the relevant bonds, modifying non-payment terms like the forum selection provision arguably requires a lower threshold, which the agreement authorizes the Republic to supplement in accordance with prevailing market norms. Finally, the Republic should enact legislation that subordinates bondholders who attempt to challenge this interpretation. Together, these steps would considerably strengthen the Republic’s position with respect to potential holdouts.
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