El Cronista
Argentina appeals Griesa’s ruling and for the first time gives sign of payment
Tuesday, November 27, 2012
By Esteban Rafele
The Argentine government last night appealed the ruling from Judge Thomas Griesa which imposed compliance on December 15 of a payment of US$1.33 billion to the NML fund. But the brief filed by the attorneys contains something new: for the first time Argentina judicially put forth that if the formula presented by the judge in New York that respected the interests of those that entered the debt swap of 2010, it could have been a proposal consistent with Argentine legislation and be debated in Congress.
The filing made focuses on the deficiencies in Griesa’s order and, in particular, on the fact that he lacks necessary jurisdiction to suspend the stay which reigns over the process and, for that, “on this point the ruling is null.”
According to what was put out last night by the Economy Ministry, the request to the appellate court “is the maintaining of the stay until the appeals process can be completed,” a process that in fact is in course beginning with the request for the plenary of the appeals court to review the case, which was made by Argentina.
The arguments used by Argentina’s legal representatives are based on the “manifest unfairness of the formula proposed by Griesa to bring into practice the clause of pari passu and consists of paying the vulture funds the whole of their claim and in one lump sum on December 15, while the bondholders that entered the swap suffered big haircuts and had terms applied on them which go until the year 2038.”
In this direction, the brief argues that “if Griesa had ordered a pro rata payment formula that would treat the actors and those that were in the same position in the same terms that Argentina offered in 2010, this would have been a remedy consistent with the precedents under Argentine law and could have been a proposal that the Argentine Congress could have debated.”
Meanwhile, the document denounced the attempt to threaten the compliance by Argentina of its performing debt by applying Griesa’s order. It also emphasizes that “the attack on sovereignty that represents the dismissing of laws passed by Congress with a consensus of the majority of the forces in parliamentary representation.”
Finally, the Argentine position highlights that the suspension of the order until the appellate court rules is the only way to protect the operational continuity of the financial system of New York and its financial agents, as well as the holders of sovereign debt.
The order for 15-D
Griesa had ordered Bank of New York (the trustee that must transfer the money to clearing agents) and the clearing agents around the world will have to detain the payment to the bondholders that entered the swap while Argentina does not constitute the escrow account for the US$1.33 billion that NML Capital demands for the total of its debt in default. If the country does not deposit the money by December 15, said Griesa, he will take money out of the regular debt payments. That day, the country has to pay out the US$3.3 billion on the GDP coupon.
This point was used yesterday by the Exchange Bondholder Group (EBG), a group of investment funds with Argentine debt that appealed Griesa’s measure as an interested third party. Making up the group, among other funds, were Gramercy, Meridian and AllianceBernstein, and they said that “(Griesa’s) mandate is illegal and unconstitutionally burdens the rights of innocent creditors, including EBG, to collect payments that the Republic owes (the plaintiffs).” In other words, EBG understands that the money Griesa wants to transfer to the “vulture” funds in case Argentina doesn’t pay the bondholders belongs to the bondholders and not the country. The government shares this strategy.
EBG used the words of the Court of Appeals to reject Griesa’s ruling. At the end of October, the court upheld pari passu, or equal treatment, that Griesa had granted the “vulture” funds, and asked the district judge to fix the method of payment. But, EBG recalls, “this court expressed ‘concerns’ about the original mandate of the district court, particularly its ‘application to third parties.’”
Ambito Financiero
Appeal of Griesa’s ruling and talk of reopening the swap
Tuesday, November 27, 2012
By Carlos Burgueño
Argentine yesterday filed its appeal before the New York court demanding the suspension of the ruling from Judge Thomas Griesa in favor of the vulture funds and the application of a stay which would allow payment of the US$3.5 billion on December 15 for the GDP coupon. It was in a brief with an important new item: it doesn’t rule out an eventual reopening of the swap if the U.S. judiciary asks for it, but in inferior terms to the close of the one called in 2010. The government would not have bigger problems in Congress approving a proposal in that direction, as it holds majorities in both chambers.
Meanwhile, yesterday the government didn’t rule out, if the judicial situation did not get resolved satisfactorily in the U.S. courts, bringing the fight against the vulture funds to the International Court of Justice in The Hague. Of course, before that step there is the U.S. Supreme Court.
The possibility was revealed yesterday, while the law firm of Cleary, Gottlieb, Steen and Hamilton presented an emergency request to the Court of Appeals of New York to suspend the order issued by Griesa’s ruling. According to the brief agreed to yesterday between the lawyers and officials at the Economy Ministry of Hernan Lorenzino, the argument is based on the possible deficiencies of the ruling from the judge to order Argentina to comply with payment, and the fact that Griesa lacks the necessary jurisdiction to lift the stay over the process. According to this argument, if it is accepted by the appellate court, all that was done by Griesa would be null.
What Argentina is definitively asking for in the upper American court is a “stay” until the appeals process is completed, which, according to the government, is already fully in process starting with the request for review from the court plenary that the country made last week.
Unfairness
Argentina also put forth before the upper court the “manifest unfairness” of the formula proposed by Griesa to bring forth the practice of the clause of pari passu, which means paying the vulture funds that are suing Argentina the total of their complaint in one payment on December 15. For Argentina’s attorneys, in their request of yesterday, this alternative would not be viable, in addition to seriously damaging the legal security of the bondholders that entered the swaps of 2005 and 2010 and who suffered large discounts and had terms going to the year 2038 applied to them. The brief also mentions that if Griesa were to put forth a “pro rata” payment formula that treated the actors and those who were in the same position on equal terms as the ones Argentina offered in 2010, “it would have been a remedy consistent with the precedents set forth in Argentine law and could have been a proposal to Congress.” With this, the government of Cristina de Kirchner is opening the possibility for the upper court to negotiate a reopening of the debt swap on similar or inferior terms as the 2010 swap, which Lorenzino also commanded as Finance Secretary.
Threat
In the brief filed yesterday Griesa’s advance on the sovereignty of the Argentine legislative branch is also criticized, as they are the only ones that can decide how to deal with the debt; and the attempt to threated to honoring of already issued debt warrants. Among them, the coupon in dollars that comes due on December 15 for US$3.5 billion, and from which Griesa demanded a payment of US$1.33 billion for the vulture funds.
The appeal also warned of the risks for the process of sovereign debt restructuring at the global level.
About the world situation, if Griesa’s ruling is accepted, Argentina says that it no successful restructuring process could be held like Argentina’s with a haircut on capital and reduction of interest and extension of time terms, a necessary situation in complex cases like in Greece. It speaks, also, of the presence of the same vulture funds in Athens, sounding out the possibility of acquiring debt from that European state.
La Nacion
Griesa refuses to postpone the sentence that orders payment to the holdouts
Tuesday, November 27, 2012
By Martin Kanenguiser
The American judiciary yesterday rejected the request from bondholders that entered the swap to be an active part of the lawsuit that the government has lost at two levels and to postpone the ruling that orders the country to pay the holdouts, in 18 days, some US$1.45 billion.
Thomas Griesa, the lower court judge in New York, denied both petitions, filed by a group of investment funds led by Gramercy. The brief, then taken to the Court of Appeals for its review, says that “the denial of the stay will create a serious risk of default that would have a negative effect at the systemic level in countries and on investors around the world, which will bring serious consequences for the global economy.”
The Economy Ministry of Argentina also filed an appeal last night before the Court of Appeals of New York. The goal is to postpone the execution of the ruling and to avoid an attachment on the funds sent by the country to Bank of New York to pay the bondholders that accepted the debt swaps. Official sources admitted yesterday to LA NACION that the chances for Griesa’s ruling to be reversed are small and that all that can be done now is to minimize the damage.
Disconcerted by the scant attention paid by the judge to the arguments of the Federal Reserve and the exchange bondholders, government officials are trying to decide now if it is also possible that there will be an impact on “Argentina’s payments that are in a gray zone.”
Since Griesa clarified that the resources that will be distributed by Bank of New York (BoNY) are not attachable – then neither will the US$3.1 billion that the country will send on December 15 to New York – and the fear of the government is that the plaintiffs “are attacking the payment flows” from the country.
"As Griesa did not take into account the impact that his ruling could have on third parties, we have more hope that the appellate court could review his decision,” said an official source.
A conceptual axis is imposed above from all the complaints over the rulings of the American courts: the disruption of the system of payment, which the Fed argued in its own brief in this case.
"The big issue to unravel is not the underlying question, but if the network of payments is attackable or not,” said the source. The official didn’t want to opine about market speculations on the chance that the government would deposit a guarantee in an escrow account before December 15, while awaiting a final disposition of the case.
"Those are instrumental proposals for a later stage,” said the source, without giving more details.
The only transcendent decision for the government would be to get the “stay” reinstated, as was asked in the review of the ruling last night, in a manner of being able to make payments in December without problems and elude a default that the majority of the market has judged to be inevitable. In a statement, the Presidency reported that “Argentina emphasizes that the suspension of the order until the appeals court rules is the only way in which to protect the operative continuity of the financial system of New York and its financial agents.” Also, it again criticized Griesa.
But this concession, said attorneys that participated in the case, would be difficult to have granted without that deposit, beyond the political reading that could be made about it.
"It will have to be a little audacious and put forth a mechanism of negotiation on the escrow account, at least with a lower sum, but that reflects that the country has good faith. Also, the judge already put forth to the parties that they agree on this issue,” said a source in the private sector with access to the proceedings.
Yesterday, the energies of the Economy Ministry and the investment funds that participated in the swaps was placed in preparing new briefs to get the stay on Griesa’s decision reinstated.
On that, attorney Eugenio Bruno, expert on debt issues, said that “the best path would be to appeal, but using the technical-legal arguments, like criticizing the application of pari passu as has been understood in this case, to defend the trust constituted by BoNY, reinstate the stay around the payments over several more years, criticize the payment formula and the escrow account.” In turn, he argued: “I don’t believe that it serves to use political arguments, on justice or injustice, of the effect on future restructurings,” which were already dismissed by the courts.
Around the possibilities that the exchange bondholders have to reverse Griesa’s refusal yesterday before the Court of Appeals, Bruno admitted to his doubts. “Usually there aren’t fixed times to rule, but the imminence of the payment date (December 15) perhaps could bring a decision before that date, but nothing can be anticipated at this time,” he explained.
On the plane of suppositions, neither Bruno nor another legal expert consulted by LA NACION gave too much importance to the rumor around the possibility of Argentina changing the location of payment to the bondholders in December. “If they do that it would be disobedient to the order of Griesa to not change the payment location and the attorneys and the banks that help the country elude the order would be considered accomplices,” said the expert.
A report from Credit Suisse indicated that “while Argentina’s situation and that of the restructured bondholders seems to be very difficult, there is still the chance that the Court of Appeals could remedy Griesa’s order with respect to the responsibility of intermediary third parties.”
On that, Boris Segura, of Nomura Securities, said that “the last hope by Argentina to not go into technical default is that the courts above Griesa reinstate the stay before December 15.”
With reporting by Rafael Mathus Ruiz, from New York
Clarin
The vulture funds also press via politics
Tuesday, November 27, 2012
Despite having just obtained two rulings in its favor – the detention of the Frigate Libertad in Ghana and the ruling from Judge Griesa that obliges Argentina to pay the vulture funds US$1.3 billion by December 15 – NML, Paul Singer’s vulture fund, isn’t giving up and is redoubling its offensive against Argentina in the U.S. Congress.
Yesterday, it came out that the leaders of the subcommittee on the Western Hemisphere have the intention of taking up a bill designed to sanction Argentina before the full U.S. House of Representatives.
The bill in question is JEFSA (Judgment Evading Foreign States Accountability) and says in its text that it “prohibits access to the markets of the United States to the foreign States that, like Argentina, have not honored the rulings of the U.S. courts for US$100 million or more during a period of two years. It prohibits access to the capital markets for companies from those states that evade judicial decisions for more than three years.”
Also, it details that “the United States will have to analyze the state of compliance of the states before giving them economic help or recommending economic assistance from an international organization. That the secretary of state must publish annual informal reports with the list of debtor countries and analyzing the consequences of their conduct for the U.S. economy.”
Next Thursday, the Western Hemisphere subcommittee will analyze this bill during a hearing scheduled for two o’clock in the afternoon. During this hearing, the members of this subcommittee could ask for amendments to the bill. Then there will be a vote, and if its majority is in agreement the bill will be taken up by the full House.
There were already previous attempts to get this bill introduced in various legislative periods. But this is the first time that the bill has gone so far in the parliamentary process.
And as the majority of the subcommittee continues to be in the hands of legislators that in various occasions have made statements against Argentina, for example Republican Connie Mack, there is consensus that this time it’s likely that the vote would be in favor of sending it to the full House.
La Nacion
They also want to block access to credits
Tuesday, November 27, 2012
By Silvia Pisani
WASHINGTON.- Not only is it in the American courts. Also in the Congress of this country the offensive was stepped up over unpaid debts with the announcement that in two days in the House of Representatives there will be a debate in committee over a bill to limit or directly impede access by Argentina to means of financing abroad.
It’s seen as the so-called “Judgment Evading Foreign States Accountability” (JEFSA), which contemplates harsh penalties for Argentina and that, after various failed attempts, will begin to be debated now for the first time in committee.
The session will be in the specific subcommittee for the Western Hemisphere in the House of Representatives, which is presided over by Florida Congresswoman Illeana Ross Lehtinen, one of those considered “hardliners” from the party in the region.
Inspired by the “Argentine case”, which it cites repeatedly in its arguments, the law proposes that access to the American capital markets be prohibited for debtor states, also limiting it to their companies and pushing for the application of an official policy to block their financing in international credit organizations.
Inspirational muse
"Argentina is the best example of the harm that can be done by states that don’t pay their creditors,” argue the findings of the bill.
"All to the detriment of those who believed in those that have the capacity to pay what is owed,” it says.
It is also mentioned that Argentine authorities habitually boast to public announce that “they will not honor” court decisions.
The progress by the bill comes despite, more than a year ago, the Argentine embassy in this city sent letters to legislators that were working on the bill over the “gross errors” in the appreciation of the country’s credit behavior in its findings.
The bill “distorts facts and supports the vulture funds in their coercive actions against debtor countries,” said the official letter sent then from the embassy.
Reuters
Monday, November 26, 2012
By Helen Popper and Daniel Bases
(Reuters) - Investors holding $1 billion worth of restructured Argentine debt filed an emergency motion in a U.S. federal appeals court on Monday to fight a ruling that they fear could prevent payment on their bonds, triggering a new default.
The move came as Argentina makes a last-ditch attempt this week to stall the U.S. court ruling that has shaken the nation's strategy to put a 2002 debt crisis behind it and fueled fears of a fresh default.
Deal Breaker
Monday, November 26, 2012
By Matt Levine
Oh Argentina. Still a mess! Basically all the bad things happened on Wednesday: Judge Griesa ruled that (1) Argentina really can’t pay holders of its exchange bonds without also paying off Elliott Associates on its old, unhaircut, defaulted bonds, and (2) neither can anyone else, including such luminaries as Bank of New York (the indenture trustee) and DTC (the clearing system for the bonds). These things are good for Elliott Associates and bad for various other people; you can read about some of the badness here or here or elsewhere.
Here is a note from JPMorgan’s Vladimir Werning on what might happen next; my favorite outcome is this:
International Business Times
Monday, November 26, 2012
By Elazar David Melendez
A messy legal fight over the fallout from a 2002 sovereign debt restructuring came to a head last Wednesday and was expected to enter a critical phase over the next three weeks, with upcoming decisions seen as having important ramifications throughout the global financial system.
The court battle, which pits the country of Argentina against a small group of “holdout” hedge funds that resisted taking losses in a sovereign bond swap a decade ago, heated up over the past few days after a New York judge said the sovereign needed to pay those parties in full. The Argentine government had been adamant in resisting payments to those investors, which account for less than 7 percent of Argentina’s creditors at the time of its last debt re-structuring, as such an action could invite lawsuits from the 93 percent of bondholders who allowed their instruments to take a “haircut” nearly a decade ago.
Reuters
Monday, November 26, 2012
By Alison Frankel
The integrity of the federal judicial system rests on the bedrock principle that judges will put aside personal feelings and issue rulings based on the facts and the law. No matter how odious litigants (or their lawyers) may be, our system says they're entitled to fair treatment. But judges are also human. If you push them hard enough, over a long enough period of time, they're going to push back. And that is why Argentina now faces a dire choice: Either it puts $1.3 billion into an escrow fund to pay off renegade bondholders who refused to participate in the country's two rounds of sovereign debt restructuring or it risks entering a technical default on $24 billion of restructured bonds. Argentina's crisis is the product of almost 10 years of litigation, in which U.S. courts have labored to honor the rights of a foreign sovereign -- and Argentina has offered no such reciprocal respect for the power of our courts.
Forbes
Monday, November 26, 2012
The novelesque drama of Argentina’s massive sovereign debt default a decade ago continues, and now it may threaten the Fed’s payments system. After billionaire Paul Singer’s hedge fund managed to get a court in Ghana to seize the Argentine Navy’s flagship vessel, NML Capital got New York Judge Thomas Griesa to force Buenos Aires to cough up the cash to pay holdout bondholders in tandem with those that accepted two rounds of restructuring.
There’s a big problem with this ruling, which has already sparked the repudiation of the New York Fed, Bank of New York Mellon, and those holding the restructured bonds: it could paralyze the Fed’s largely automated payments system, which processes an average $2.6 trillion a day. Furthermore, it could push Argentina into technical default and make Bank of New York Mellon, and several clearing corporations and agents legally liable if Buenos Aires attempts to pay the 93% mass of bondholders who took the 2005 and 2010 restructurings, and chooses to leave out the so-called “vulture funds.”
FIN Alternatives
Monday, November 26, 2012
Elliott Associates has won a huge victory in its ongoing battle with Argentina over the country's debt default a decade ago.
A federal judge in New York ruled that Argentina must pay Elliott and other holders of its defaulted bonds $1.33 billion if it wishes to pay debtors who accepted its restructuring more than $3 billion. The decision means that Argentina, which has steadfastly said it would not pay the holdouts, led by Elliott affiliate NML Capital, might be forced to default on its restructured debt.
Benzinga
Monday, November 26, 2012
On thin volume, shares of the Global X FTSE Argentina 20 ETF (NYSE: ARGT [FREE Stock Trend Analysis]) were off just about $0.01 on Monday. That is no small feat given that Argentina, South America's third-largest economy, is inching closer to its second sovereign debt default in the past 11 years.
A week ago, ARGT rallied even after The Economist reported Argentina was likely to default on its debt. At the time of that report, the issue appeared to be not if the country would default again, but simply whether it would engage in a selective or technical default. Not transferring funds to pay so-called holdout bondholders by December 2 would result in selective default.
Daily Guide
Tuesday, November 27, 2012
An Argentine group has threatened Ghana over the South American detained naval vessel at the Tema Port, the Libertad (Liberty).
Patrioticos de Argentina (Patriots of Argentina) has posted its warning on a local website in which it calls on the Ghanaian government to have the vessel released or face its wrath.
The vessel, according to the group, was being detained in contravention of international law, the Vienna Convention on the Law of Treaties.
“Your government have (sic) have illegally seized our Libertad frigate, a School ship belonging to the Argentine Navy.”
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