UPDATE 1-EU agrees to longer bond maturities, haircuts-draft

(Updates with statement on debt restructuring)

BRUSSELS, Dec 17 (BestGrowthStock) – EU leaders have agreed to try
to lengthen the maturities of new sovereign bond issues and have
confirmed private investors’ involvement in the future euro zone
rescue mechanism, a draft summit statement showed on Friday.

“Member states will strive to lengthen the maturities of
their new bond issues in the medium term to avoid refinancing
peaks,” said the draft, obtained by Reuters.

The draft confirmed that the permanent euro zone rescue
mechanism, to be launched in mid-2013, would open the
possibility of private sector investors taking a loss in the
event of a sovereign debt restructuring.

It said all new bonds issued in the euro zone from June,
2013 would carry collective action clauses (CACs) which allow a
specified majority of bond holders to overrule minority ones
when seeking a debt restructuring deal with the sovereign.

“This would enable the creditors to pass a qualified
majority decision agreeing a legally binding change to the terms
of payment (standstill, extension of maturity, interest rate cut
and/or haircut) in the event the debtor is unable to pay,” the
draft said.

The threshold of the majority was not specified.

The draft added the CACs would be modeled on existing ones
in the United States and Great Britain.

It also confirmed that any debt restructuring process would
be in line with current practices of the International Monetary
Fund.

(Reporting by Marcin Grajewski; editing by Luke Baker)

UPDATE 1-EU agrees to longer bond maturities, haircuts-draft