Hunton advises on sovereign debt conversion transactions that combine fiscal relief, credit enhancement, and strategic impact funding. Our team has advised on more than $3 billion in successful sovereign debt conversions and is currently advising on billions more. We represent development finance institutions, export credit agencies, private lenders, sponsors, and sovereign counterparties in transactions that require technical rigor, cross-disciplinary coordination, and disciplined execution. We help DFIs develop core form documentation and structuring frameworks that underpin modern sovereign debt conversions using capital markets and political risk insurance.

Why Hunton

Hunton brings international recognition, worldwide experience, and an agency-side perspective to sovereign debt conversion matters. The team is consistently ranked by Chambers, The Legal 500, and IJGlobal, and has earned more than a dozen “Deal of the Year” awards in the past five years. We advise multilateral and bilateral development finance institutions, export credit agencies, private lenders, sponsors, and sovereign counterparties across emerging and developed markets. We do not simply participate in sovereign debt conversion transactions; we help shape the documentation and structures that define the market.

“The team is the most responsive, timely, and strategic of any firm I have worked with in the development space. We value the quality of the advice as much as the quality of their work.”
– Chambers USA, 2025

Our Approach

Our approach spans the full life cycle of a sovereign debt conversion transaction, from early-stage structuring through closing and post-closing stabilization. We assess capital stack dynamics, stakeholder constraints, and regulatory risk, then structure transactions to optimize economics, governance alignment, enforceability, and credit outcomes. We negotiate and draft the political risk insurance contract, project implementation agreement, commitments agreement, project funding agreement, and related project documents. We also coordinate cross-border closings, monitor rating agency engagement, obtain legal opinion coverage, and support sovereign compliance, covenant management, reporting frameworks, and long-term transaction durability after closing.

What Is Sovereign Debt Conversion?

A sovereign debt conversion is a structured transaction in which a sovereign’s existing debt is replaced, exchanged, or otherwise restructured, often with support from development finance institutions or other credit enhancement providers. These transactions are designed to generate fiscal savings, enhance debt sustainability, and mobilize capital to advance policy, social, or environmental objectives.

They generally involve three interdependent components:

Debt Exchange: Existing sovereign debt is repurchased, restructured, or swapped for new financing with credit enhancements from a DFI.

Commitments: As consideration for the debt conversion, the sovereign agrees to achieve specific policy, conservation, or social objectives.

Impact Funding: A portion of the savings from the debt conversion flows into an independent endowment fund or program to achieve the commitments.

Political Risk Insurance and DFI Guarantees

Our sovereign debt conversion practice includes substantial experience in political risk insurance and DFI guarantee-supported transactions. Many of the transactions on which we advise use PRI or guarantees to support refinancing structures, improve debt profiles, and unlock funding for conservation, resilience, or other targeted impact programs. Our work for DFIs includes development of model templates, including insurance contracts and project implementation agreements, for impact bond structures that facilitate external debt management or conversions for eligible host country governments.

• Advising DFC on its Impact Bonds program for the development of model templates, including the insurance contract and the project implementation agreement in relation to DFC’s insurance product that supports the creation of funding for targeted impact programs through the issuance of bonds that facilitate external debt management or conversions for eligible host country governments.
• Represented DFC in connection with its provision to an insured party of political risk insurance of up to $1 billion in support of a debt conversion for impact in Ecuador intended to fund terrestrial and aquatic biodiversity conservation, climate change mitigation, and investment in the human well‑being of the indigenous communities in the Amazon Biocorridor region.
• Represented the InterAmerican Development Bank (IDB) and the European Investment Bank (EIB) as guarantors in the refinancing of $293.3 million of public debt owed by the Government of Barbados. This unique debt swap transaction will provide Barbados significant debt relief while generating over the life of the loan about $125 million in savings that will be dedicated to enhancing resiliency programs addressing the impacts of climate change.
• Represented DFC in connection with risk insurance support for an innovative debt conversion in support of environmental conservation efforts in Gabon. The marine conservation enabled through a debt conversion that will create an estimated $178.5 million of dedicated funding for biodiversity protection and nature-based resilience through management of Gabon’s Marine Protected Areas and improve Gabon’s debt profile.
• Represented DFC in the provision of $656 million in political risk insurance for a sovereign-debt-for-nature swap in Ecuador in connection with a Galápagos marine conservation‑linked bond, which is expected to generate $323 million for marine conservation in the Galápagos Islands over the next 18.5 years.
• Belize Blue Bond Represented DFC in connection with the $364 million Blue Bond transaction with the Nature Conservancy (TNC) and the Government of Belize. The innovative debt conversion, which DFC made possible through $610 million in political risk insurance (covering loan principal and interest), will provide sovereign debt relief and simultaneously fund projects in support of Belize’s commitment to protect 30 percent of its ocean.

• Award for Innovation—Bond Structure (Sustainability Bond) and the Award for Sustainability Bond of the Year—Sovereign by Environmental Finance’s Bond Awards in 2022.
• ESG Finance Deal of the Year at Latin Lawyer’s Awards in 2024 and the Award for Innovation—Bond Structure by Environmental Finance’s Sustainable Debt Awards in 2025 for this transaction. Read more about this landmark project in the New York Times.
• IFLR Africa Awards Capital Markets Deal of the Year in 2024 and Bonds, Loans & ESG Capital Markets Africa Award for Ground‑Breaking Deal of the Year in 2024 for this transaction.
• Recognized for the most innovative debt swap in Latin America and the Caribbean by Prime Minister Mia Amor Mottley at the 2025 TIME Earth Awards.
• Award for innovation—bond structure (green bond) by Environmental Finance’s Sustainable Debt Awards in 2025. Best Multilateral‑backed Deal of the Year, and Most Impressive Liability Management of the Year, by GlobalCapital Latin America Bond Awards 2025.