Ambito Financiero “Vultures seek to collect insurance against default

Ambito Financiero

“Vultures seek to collect insurance against default

 

Wednesday, November 21, 2012

 

Economy Ministry Hernán Lorenzino said yesterday that the vulture funds “are seeking a technical default of Argentina and to collect insurance” they contracted in favor of that eventuality.  In radio interviews, he joined in the denunciation of Cristina de Kirchner, who warned about maneuvers oriented toward Argentina being considered in a situation of “technical default”. 

 

The minister said that “now it’s beginning to be unveiled that (the vulture funds) now are not so interested in the ruling” of New York federal judge, Thomas Griesa.  He explained that a technical default is “when you want to pay and there is money, there is willingness by the one who has to pay and the one who wants to receive the money, but something happens and that something impedes the debtor from paying the creditor.”

 

Normal payment

 

For Lorenzino, “there is nothing random” on the committees that decide the eventual rating of a technical default, and that they are made up of “the risk ratings agencies, the banks involved in the business of insurance and even some of the vulture funds.”  According to the minister, “the country has maintained normal debt payments since 2005, and the vulture funds are seeking a scenario with a preliminary measure, to say: Argentina will not pay, and that triggers the insurance that they have.” 

 

The official recalled that “the Federal Reserve filed spontaneously in the New York court and warned about the importance of not confusing a purely speculative complaint from a vulture fund with the system of payments” of the United States.  “Also the banks and the clearing agencies that process the payments showed up to make the same warning,” he said.

 

He also said that “Argentina’s arguments that were presented are being strengthened and they point toward taking off the mask of these vultures, as the only thing they want to hide is that they pay no taxes, the use fiscal havens, etc.”  And he warned that those speculative funds “operate with a base on two pulleys to be able to achieve their objectives: the attorneys and the pressure groups, those that can send out an opinion.  The spokesmen for those speculators doesn’t know countries nor borders; we have them on the outside but also, regrettably, within,” he argued.

 

Justification

 

Meanwhile, he justified the restrictions on hoarding cash, as “a country that has to pay in dollars and doesn’t print that currency has to take measures to ensure it will never lack them.”  Also, he said, “since it is a peripheral country, it has to be sure that nobody has any doubts that there are necessary dollars and those left over to handle its obligations,” he added.

 

Lorenzino concluded: “They want us to be made to believe that nobody can access dollars, but in reality they’ve been used to pay for imports, tourist services and debts, both in the public and private sectors.”

 

 

Pagina/12

Vulture funds and low flying maneuvers

 

Wednesday, November 21, 2012

 

The Economy Minister widened the concept that he’d first shared in his interview with Pagina/12.  He said that “the vulture funds are owls that seek benefit by betting on a technical default,” which they want to provoke with obstacles they impose.

 

In line with statements made on Sunday in his interview with Pagina/12, Economy Minister Hernan Lorenzino argued yesterday that the vulture funds are not interested in a favorable ruling in the lawsuit that they are confronting Argentina with, but to benefit themselves with a technical default, a product of the judicial barriers that they themselves impose.  “They are owls that seek a technical default to collect insurance they contracted to favor themselves with that eventuality.  They want to collect everything, and now, before the creditors that have payments committed to them until 2033,” argued the head of the Palacio de Hacienda. The statements from the official joined in the denunciation without President Cristina Kirchner, who warned about maneuvers oriented toward the country not being able to pay the bondholders that entered into either of the two debt restructurings.  For their part, the vulture funds made their response yesterday evening to the Argentine presentation, in which they also reject the arguments put forth by institutional investors, compensatory chambers, Bank of New York and the Federal Reserve of New York, which backed the country.

 

The parties filed their positions against the supposed discrimination by the country among those that entered the debt swap and the vulture funds that rejected it both times.  These speculative funds have gotten a favorable ruling from Judge Thomas Griesa, arguing unfair treatment, which was then upheld by the Court of Appeals.  The deadline for the filings ended on Monday.  The expectation will be put in which Griesa decides, whom the appellate court asked to come up with a formula to remedy that supposed unfairness.  “In reality, the holdouts, more than collecting, have contracted financial derivatives, which are a kind of international financial card game, where the banks bet on which country will pay and which won’t.  If that default is produced, even if it’s technical, they collect enormous funds,” the head of state said two days ago.

 

The suspicion had been discussed by Lorenzino in this newspaper over the weekend.  “Now it’s beginning to be unveiled that they are not very interested in the ruling,” said the minister, who labeled the vulture funds as “owls” in a reference to the nickname with which he designated the attorneys that profit from people that fake traffic accidents to collect on insurance.  “When you want to pay and there is case, there is the will from those who have to pay and the ones who want to receive the money.”  But if something happens and it impedes the debtor to pay the creditor, it would be a technical default, explained the official.  In these cases, the funds that litigate would be benefitted by collecting on insurance against default.  “There is nothing random,” he added.  The committees that decide the eventual rating of a technical default is made up of risk ratings agencies, banks involved in the business of those insurance contracts and even some of the vultures.  

 

Lorenzino referred also to the support that the country got from most of the financial institutions involved on Friday of last week, together with the law firm that represents the country.  “The Federal Reserve filed in a spontaneous fashion in the New York court and warned about the importance of not confusing a purely speculative complaint from a vulture fund with the system of payments in the United States.  Also the banks and the clearing agencies that process the payments showed up to make the same warning,” he listed.  However, in their reply, the vulture funds argue that “the concerns put forth by the Federal Reserve of New York and the Association of Compensation Chambers simply have no place in that issue.  “The application of the court’s orders to third parties only would be put forth if Argentina intends to deliberately violate them.  On the contrary these entities should both be conscious of their obligation to not assist Argentina in those violations,” the filing adds.