The Rise And Fall Of Pier 1

LONDON (Reuters) &#8211; The option of a one-time payment holiday during times of intense crisis might enable countries to pandemic-proof their bonds, a prominent debt fund believes



Economic fallout from COVID-19 has triggered a record number of sovereign defaults in 2020, and managers at Boston-based GMO, heavily involved in sovereign restructurings in recent years, have proposed redesigning bonds so that countries can suspend or even wipe off debt payments for up to a year.



Credit rating agency S&amp;P has downgraded 51 countries this year, and four &#8211; Lebanon, Ecuador, Argentina and Belize &#8211; have already defaulted, beating a record set in 2017.



“In the case of Ecuador, it might have provided enough liquidity relief to prevent a default,” said GMO’s Carl Ross, one of the payment holiday plan’s two architects and a negotiator in Ecuador’s and Argentina’s restructurings.



He favours that idea over current approaches such the linking of debt payments to economic fortunes chosen in 2012 by Greece, and the “hurricane clause” &#8211; offering debt relief if a second catastrophic storm hits &#8211; used in Grenada’s 2015 restructuring.



“Our proposal is to revert to something much simpler,” Ross said. “The whole idea is to prevent countries getting into distress in the first place”.



Sui-Jim Ho, a partner at Cleary Gottlieb &#8211; the law firm that helped draft Granada’s hurricane clause &#8211; said discussion around temporary debt suspensions was gaining traction.



However, he questioned how simple implementing them would be.



“We still need to figure out how the pandemic trigger event should be drafted,” he said “&#8230;Defined too loosely and it could be triggered too easily. Defined too restrictively and you could end up with too little too late.”



Graphic: Bond prices plunge ahead of defaults&nbsp;<a href="https://fingfx.thomsonreuters.com/gfx/mkt/dgkvllxenvb/Pasted%20image%201598352935580.png">here</a>



<figure class="wp-block-image"><a href="https://fingfx.thomsonreuters.com/gfx/mkt/dgkvllxenvb/Pasted%20image%201598352935580.png" target="_blank" rel="noreferrer noopener"><img decoding="async" src="https://fingfx.thomsonreuters.com/gfx/mkt/dgkvllxenvb/Pasted%20image%201598352935580.png" alt="Reuters Graphic"/></a></figure>



<h3 class="wp-block-heading">GAME THEORY</h3>



Ross said the potential criticism that GMO’s proposal could be abused by politicians looking for creative funding options was a low risk.



Bond markets would soon work out governments that tried to play the system, and as the deferral option would only be available once &#8211; or perhaps once a decade for long-term bonds &#8211; it was also likely to be used sparingly.



“Interactions between bond markets and governments are a ‘repeated game’ &#8230; We believe this dynamic would be a very effective self-policing mechanism,” he said.



His idea would need International Monetary Fund or U.S. Treasury support to take off, and a country would also have prove it was workable.



Ross said he suggested it to Ecuador but the process was moving too fast by then, and it wouldn’t have prevented Argentina or Lebanon defaulting as their debts had already spiralled out of control.



Countries hit by multiple crises wouldn’t be saved either as having more than one deferral or debt forgiveness option would ramp up their borrowing costs.



Ross and the proposal’s co-author, Mustafa Ulukan, estimate that a single one-year deferral option might only add 0.6% to the 8% a country with a low B-grade rating might pay to borrow for 10 years.



The approach could also address ‘freeriding’ criticism private sector bondholders are now facing for not following G20 governments and allowing the world’s poorest countries to suspend debt payments during COVID-19.



Pressure for that to happen is growing but creditors warn the rating agencies would class it as a default, opening up a host of problems. That is something GMO thinks its plan would avoid.



“This (deferral) option, if broadly used, would be extraordinarily valuable in the current global environment,” Ross said. “This year and 2021, we have a lot of countries that are going to default.”

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(Reuters) &#8211; TikTok has removed more than 380,000 videos in the United States for violating its hate speech policy so far this year, the short-form video app said on Thursday.



The app, owned by China’s ByteDance, also said it banned more than 1,300 accounts for posting hateful content.



TikTok said in a blog post that it had acted on content such as race-based harassment and that it also had a zero-tolerance policy on organized hate groups and on content that denied “violent tragedies” like the Holocaust or slavery.



The app, which is hugely popular among teenagers, is best known for dance and lip-syncing routines and viral challenges, but a review by the Anti-Defamation League earlier this month said that the platform was being used to spread white supremacist and anti-Semitic hate speech.



TikTok, which has been under scrutiny over its content moderation practices, in March named the initial members of a content advisory council, to give advice on its policies and evaluate the company’s actions.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://www.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-1.jpg" alt="" class="wp-image-352573" width="705" height="521" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-1.jpg 594w, https://cms.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-1-300x221.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-1-80x60.jpg 80w, https://cms.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-1-570x420.jpg 570w" sizes="auto, (max-width: 705px) 100vw, 705px" /><figcaption>WASHINGTON, DC &#8211; FEBRUARY 16: U.S. President Donald Trump stands during a news conference announcing Alexander Acosta as the new Labor Secretary nominee in the East Room at the White House on February 16, 2017 in Washington, DC. The announcement comes a day after Andrew Puzder withdrew his nomination. (Photo by Mario Tama/Getty Images)</figcaption></figure>



U.S. President Donald Trump also ordered ByteDance last week to divest TikTok’s U.S. operations within 90 days, in the latest effort to ramp up pressure on the Chinese company over concerns about the safety of the personal data it handles. U.S. officials have expressed concerns that information on users could be passed on to China’s government.



TikTok has said that it has never provided user data to China and that it would not do so if asked.

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BEIJING (Reuters) &#8211; China and the United States have agreed to hold trade talks “in the coming days” to evaluate the progress of their Phase 1 trade deal six months after it took effect in February, the Chinese commerce ministry said on Thursday.



Ministry spokesman Gao Feng made the comments at a weekly briefing held online, but did not elaborate.



<h4 class="wp-block-heading">RELATED COVERAGE</h4>



<ul class="wp-block-list"><li><a href="https://www.reuters.com/article/us-usa-huawei-tech/china-vows-all-necessary-measures-to-protect-its-firms-following-u-s-curbs-on-huawei-idUSKBN25G0Y8">China vows all necessary measures to protect its firms following U.S. curbs on Huawei</a></li></ul>



They followed Tuesday’s remarks by White House Chief of Staff Mark Meadows that no new high-level trade talks were scheduled, though both sides were in touch about implementing the Phase 1 deal.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://www.cnbcafrica.com/wp-content/uploads/2019/12/hqdefault-95.jpg" alt="" class="wp-image-352107" width="629" height="471" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2019/12/hqdefault-95.jpg 480w, https://cms.cnbcafrica.com/wp-content/uploads/2019/12/hqdefault-95-300x225.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2019/12/hqdefault-95-80x60.jpg 80w, https://cms.cnbcafrica.com/wp-content/uploads/2019/12/hqdefault-95-265x198.jpg 265w" sizes="auto, (max-width: 629px) 100vw, 629px" /><figcaption>China’s lessons for South Africa on tackling poverty</figcaption></figure>



The deal, reached on Jan. 15, and seen as a major breakthrough after a two-year long trade dispute between the world’s two largest economies, set ambitious targets for China to sharply boost purchases of U.S. farm and manufactured goods.



But ties quickly soured in the aftermath of the coronavirus pandemic and China’s imposition of a new national security law in Hong Kong.



Both sides traded threats and sanctions on individuals and businesses, such as Chinese video platform TikTok.



Official data also suggests China’s imports of U.S. farm and manufactured goods, energy and services are well behind the pace needed to meet a first-year target increase of $77 billion over 2017 purchases.



China’s purchases have increased as its economy recovers from this year’s coronavirus lockdown, however.



On Tuesday, U.S. President Donald Trump told reporters he had postponed an Aug. 15 review of the trade pact, in frustration over Beijing’s handling of the virus pandemic.

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