Trustees Versus Fiscal Agents for Sovereign Bonds

Issuing sovereign bonds in the international markets using a trust structure rather than a fiscal agency agreement conveys several benefits for the issuer and the holders of the bonds. Principal and interest payments received by a trustee will be less susceptible to attachment by third party creditors of the issuer (a benefit for both the issuer and the bondholders). The trustee, as the representative of the bondholders, can act as the natural interlocutor should circumstances arise requiring a modification to the instruments. Finally, the trustee will be principally (the U.S. practice) or wholly (the English practice) responsible for enforcing the bonds following a default and, if so instructed, will do so ratably on behalf of all holders. This feature tends to dampen the interest of congenitally litigious creditors in bonds issued under trust structures