The Lawyer Who Helped Greece And Argentina Sees New Emerging-market Defaults Brewing

FOR DEVELOPING COUNTRIES facing down creditors, Lee Buchheit was the cavalry.

- Ben Bartenstein

During his 43-year career at Cleary Gottlieb Steen & Hamilton LLP, the quick-witted restructuring lawyer gained a reputation for shattering investors’ dreams of sky-high returns.

Buchheit, 68, brought arcane legal terms such as collective action clauses and asset protection orders into modern debt markets. He deployed the former to spur a settlement for Greece, enabling a super majority of creditors to forge an agreement that was binding on all bondholders. Buchheit applied the latter in Iraq to force U.S. investors to divest from local assets.

Now retired from Cleary, the Pittsburgh native has a frightening prognosis for the coming decade: He foresees the biggest string of defaults since the early 1980s. He blames the rise of bullet bonds, noncallable debt instruments that pay back the entire principal at the final maturity date. In an interview, Buchheit spoke about what he’s learned over his career and the restructurings he sees on the horizon.

BEN BARTENSTEIN: How did you get involved in the debt restructuring business?

LEE BUCHHEIT: I realized that my long-term survival in the legal profession would require me to find a practice area that would offer a degree of continual intellectual refreshment. The sovereign practice does that. Each country is different. Not just in their financial condition but also in their culture, geopolitical leverage, and internal politics.

BB: And not without some drama. You almost had your passport revoked, right?