Jurisdiction(s):
United Kingdom

Key definition

Sovereign debt definition

What does Sovereign debt mean? Sovereign debt describes the financial obligations of a state’s central government to its creditors, typically documented as tradable securities (government bonds, notes and Treasury bills) or as loans. In UK practice it refers to liabilities of HM Treasury issued as gilts and Treasury Bills via the Debt Management Office; related fiscal measures use “government debt” or “public sector net debt”. In Ireland it aligns with the Exchequer’s National Debt managed by the NTMA, comprising Irish Government Bonds and Treasury Bills. The expression is descriptive rather than a term defined in UK or Irish statute, though related fiscal terms are. Key legal...

Transactional and market-based techniques for sovereign debt restructuring: CACs, exit consents, creditor co-ordination, innovative clauses and swaps, SDRM and the Common Framework

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

Sovereign debt restructuring techniques

The build-up of public liabilities and their steady rise have triggered repayment difficulties and, in some instances, default. Consequently, as states accumulate untenable debt loads (i.e. when the debt-to-Gross Domestic Product ratio climbs so high that policy measures cannot reverse it), the imperative to reorganise their sovereign obligations intensifies. In broad terms, sovereign debt restructuring refers to the set of methods employed by sovereigns to avert or address financial and economic turmoil and to restore debt to sustainable levels. The bulk of sovereign borrowing is evidenced through bond issues (domestic or international) and, on occasion, commercial loans. Multilateral liabilities are not subject to restructuring (at most, rolled-over), while bilateral exposures are typically rescheduled or reworked under the auspices of the Common Framework or the Paris Club. Sovereign debt workouts comprise two dimensions: procedural and substantive. The procedural limb concerns how the reorganisation is undertaken (e.g. by invoking collective action clauses (CACs) or via an exchange offer, sometimes supported by other techniques), whereas the substantive limb concerns the modification of the obligations themselves, commonly involving rephasing of obligations and timelines, with scope defined by context and negotiated solutions within recognised forums and established contractual mechanisms accordingly therein...

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Professor Rodrigo Olivares-Caminal

Queen Mary University of London

Rodrigo Olivares-Caminal is a Professor in Banking and Finance Law at the Centre for Commercial Law Studies (CCLS) at Queen Mary University of London. Prior to joining CCLS he was a Senior Lecturer in Financial Law and the Academic Director at the Centre for Financial and Management Studies (SOAS), University of London and the School of Law, University of Warwick. He taught in undergraduate and postgraduate courses in various Schools of Law and Business Schools in the United Kingdom, Spain, Greece, France and Argentina as well as in professional training courses in Africa, Asia and Europe. Rodrigo has acted as a Sovereign Debt Expert for the United Nations Conference on Trade and Development (UNCTAD), Senior Insolvency Expert for the World Bank / IFC and as a consultant to several multilateral institutions in Washington DC and Europe, Central Banks and Sovereign States as well as in...

Web page updated on 22/05/2026

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