Debt Coverage:
La Nacion: “With all the cards on the table, Griesa decides the fate of the bonds”
Clarin: “Vulture funds: they insist on collecting what is owed them”
Ambito Financiero: “In two years, Brazil’s yields could be had”
El Cronista: “Cristina against the vulture funds: ‘They want to provoke a technical default’”
El Cronista: “Exchange bondholders: They say that Argentina can pay the vultures and they ask that they receive just 1% if disbursements are blocked”
Ambito Financiero: “Vulture funds to Griesa: ‘Speed up solution to the case’”
Ecademy: “Is Argentina One Step Closer to Default?”
MercoPress: “Argentina ‘will not enter in default’ and will honour all re-scheduled bonds”
Business Insider: “Argentina Has The Money To Pay It’s Debts, But Here’s Why It Would Rather Drop Dead First”
La Nacion
With all the cards on the table, Griesa decides the fate of the bonds
Tuesday, November 20, 2012
By Florencia Donovan
Argentina got the support of the investment funds, the representative banks of the vulture funds and even the Federal Reserve of New York (Fed) in the case over the default being handled by Judge Thomas Griesa, which led bonds to rebound yesterday and show improvements up to 5% in prices.
At the close of this edition, it was expected that the vulture funds would filed their rebuttal before Griesa, after Argentina’s brief was revealed on Friday that again refused to pay those who fell outside the two debt swaps, the so-called holdouts, despite the demands from the judge of the Southern District of New York.
"This support from the Fed serves for Argentina’s defense and that of the holders of restructured bonds in relation to the extension of the attachment over payments, an issue that Griesa and the Court of Appeals will have to resolve next,” said Eugenio Bruno, attorney at the Garrido Firm and an advisor to bondholders.
In October, the U.S. Court of Appeals upheld a ruling from the beginning of this year from Griesa in which, through a broad interpretation of the pari passu clause, ordered Argentina to not discrimination among the holders of bonds that entered the swaps and those who didn’t. The New York judge made it clear that he plans on having the plaintiffs collect part of what Argentina will pay in New York on December 2 and 15 for the maturities of the Global 2017 and the GDP Coupon.
"The ruling that required the country to pay the bondholders that didn’t participate in the previous debt swaps has the potential to cause losses for those who did,” warned the ratings agency Moody’s yesterday. However, it clarified, the sentence didn’t resolve any of the issues from the previous ruling determines its impact on ratings. With the plaintiff’s brief presented yesterday in the final hour, it only now falls to Judge Griesa to decide if Argentina has to pay and what mechanism it has to use. It is expected that his decision will be known before December 2.
The factor that brought the rebound
In its filing to the court, as such, the Fed asked that the lawsuit between Argentina and the funds not affect third parties.
After all, according to lawyers who are following the issue closely, an attachment on the disbursements that Argentina makes to its holders of bonds in effect could weaken the position of New York State legislation for future emissions and even generate harm for Bank of New York (BoNY) which is the paying bank for Argentina abroad and has a trustee role for the holders of bonds in effect.
"Without taking a position with respect to the decision of the court in the direction that Argentina has not honored the payment of the bonds, the Fed asked that the judge to only apply the eventual attachments to Argentina and those payment agents for the country that have direct relation to the Republic, and not the other intermediaries in the payment process,” said Bruno.
"The Fed is asking that the judge expressly indicate to whom the attachment will apply. He would have to exclude any member of the transactional system of operations in New York,” he insisted.
In the market this support served to limit the punishment that Argentina bonds with U.S. risk are suffering since the end of October. It facilitated a rebound greater than 5% among GDP coupons placed under that law, since it was estimated that the filing will delay the timing for Griesa to decide and will leave the path open for the country to continue service payments through December 15 without problems.
Clarin
Vulture funds: they insist on collecting what is owed them”
Tuesday, November 20, 2012
By Ana Baron
(NEW YORK) Today the countdown begins. After the presentations that the Argentine government and the vulture funds made setting out their respective positions, now Judge Thomas Griesa must decide who he sides with. His ruling has created enormous expectations on Wall Street. While Argentina could appeal it, Griesa’s ruling will set a new precedent.
In the framework of the decision in which the Court of Appeals said that Argentina must pay the vulture funds and the other holders of Argentine bonds in default in the same manner as it pays the holders of restructured bonds, Griesa has to decide now what the amount is to pay and what will be the impact on the payment agents, like Bank of New York, if Argentina decides not to pay the holdouts (bondholders that didn’t enter the swap).
Last night it was expected that the holdouts would made a new filing in response to the filing Argentina made on Friday. But all analysts had no doubt that the brief would again demand 100% payment on the bonds they hold plus interest, which in total comes to US$1.43 billion.
Argentina is arguing that this kind of payment goes to the detriment of the bondholders that entered the exchange suffering a haircut of more than 70%. In its filing the Argentine government warned about the possibility of a technical default and the manner that all that will affect future voluntary debt restructurings in other countries.
In fact, the Federal Reserve of New York on Friday sent a letter to Griesa defending Argentina’s position. “The expansive application of the mandates demanded by the plaintiff (…) is too broad and could have operational consequences that impede the good and effective functioning of the payment system, the letter warned, calling on “the court to interpret the default actions in a narrow manner.” The Bank of New York, one of the payment agents, also made a presentation explaining that they represent the bondholders and not Argentina and for that reason they should not be subject to threats of lawsuits.
Gramercy, Fintech and other investment funds, which hold restructured bonds, came out in defense of Argentina: they see danger for the payment system. In the November 9 hearing, Griesa made it clear, however, that they are not part of this lawsuit. “It doesn’t help that you say to me that you’re hostages of this situation,” Griesa said to O’Shea, attorney for Gramercy. “We have a Court of Appeals decision and the results are inevitable,” Griesa added, explaining that the court didn’t say to Argentina to stop paying the restructured bondholders, what it said is that the holdouts have to collect as well. “They have the right to money,” he said. Griesa will announce his decision before December 2 when Argentina has to pay.
Ambito Financiero
In two years, Brazil’s yields could be had
Tuesday, November 20, 2012
Former Economy Minister Roque Fernández says that Argentina could pay the vulture funds the same as those who entered the swap and honor Judge Thomas Griesa’s ruling. He says that “the market has no memory” and that if the country solves this problem and the one it has with the Paris Club, “in two years it could return to the international market with yields like Brazil.”
Reporter: How will the lawsuit continue between Argentina and the vulture funds after New York Judge Thomas Griesa’s decision?
Roque Fernández: My conjecture is that the judge will interpret the pari passu clause correctly. This is to say that it’s not that Argentina has to pay 100% of the debt that these so-called vulture funds demand. They are demanding 100% of the original debt, but the debt that is being collected today through amortizations and interest by those that accepted restructuring is a much smaller part of that original amount. So the clause of pari passu will allow paying the vulture funds that same small part that those who entered the swap are collecting. Not 100% of the original.
R.: And that payment would halt the demand for 100%?
R.F.: So it occurs in lawsuits, there still exists novation. We suppose that in a lawsuit like this one where 90% of the creditors approve the debtor’s offer and 10% say no. When there is a vote and the special majorities are achieved, the judge decides that the proposal is firm. There this legal factor occurs called novation, which says that the old debt disappears and a new one appears. In this case, it would be the amount agreed to in the swap and accepted by the bondholders. But what happens is that in our case this didn’t happen because the debt contracts didn’t have a collective action clause that says the judge could ratify this, so there is no novation. By not producing it, those that didn’t enter the exchange (holdouts and these vulture funds) will collect pari passu, but will also stick to the demand for 100% of the original debt.
R.: Will the U.S. court accept that demand finally?
R.F.: It’s going to be very difficult for that criteria to not be respected. You cannot dismiss the investors’ property rights for those who didn’t accept restructuring. There could be some kind of pressure from colleagues for them to collect pari passu and perhaps some additional monies and the demand ends. But American law sides with them. Calling them vultures is irrelevant to any court.
R.: Would Argentine courts apply the same criteria?
R.F.: Of course, here the procedure is that people buy litigious debt and execute it. Judges rule in the same direction.
R.: Does the situation change from the intervention of the Fed, which asked for limits?
R.F.: There is a circus bit shown in the vulture funds asking for 100% and it still sides with Argentina. But it’s clear that it’s capricious of Argentina to stay out of the capital markets. If they settled the issue with the Paris Club and this lawsuit with the funds was solved, it could return gradually to the international markets. Memory is short in the markets. In two years we could have the same rates as Brazil. It’s not that much money either, while there is greater difficulty because it’s all happening in the midst of other problems, like the exchange rate delay, with the difficulty of maintaining adequate reserves. It’s best to pay and end it.
Interview with Florencia Lendoiro
El Cronista
Cristina against the vulture funds: ‘They want to provoke a technical default’”
Tuesday, November 20, 2012
By Natalia Donato
“They’re seeking to provoke a technical default,” President Cristina Fernández shot off during the event to close the annual meeting of the Argentine Chamber of Construction (CAC), held yesterday at the Sheraton Hotel. She blamed the risk ratings agencies and the banks for defending the position of the vulture funds, who recently got a ruling from American courts that orders the Argentine government to pay those with bonds in default.
The president also defended the position of the American Federal Reserve, which asked Judge Thomas Griesa to not block payments by Argentina to the bondholders. The entity on Friday filed a brief with the judge in which it warned that an eventual payment to the vulture funds, which harms the payment to creditors that entered the exchange, could affect the whole system of payments.
The head of state argued that “the vulture funds have contracted a financial derivative called Credit Default Swaps (CDS), which constitute a financial card game.” “Those that are part of the committee that decides the fate of the debt of those financial derivatives are the big banks of the United States, Europe and Japan, which afterwards demand that we pay those who didn’t enter the swap,” the President said.
Before a standing ovation from workers of the UOCRA, who came to hear her, Cristina also referred to the achievements and growth seen in construction in the last 10 years and cheered throughout almost her entire speech with the previous words of the head of the CAC, Carlos Wagner. Except when the businessman said that part of the fall in this activity this year was from the currency controls adopted by the government.
“The rules put forth by the Central Bank to ensure payment of international commitments affected the real estate market, which was seen mostly in private construction,” Wagner said, to which the President responded, without moving to admit any failure: “Real estate activity is not the same as construction. This activity has a clear patriotic sustenance, it has the luck of having materials produced and paid for int he country, and it’s all done in pesos. Does activity need a shift? Yes it needs a change in cultural parameters,” she said.
Also making an allusion to the controls on inflow and exit of capital was American economist Nouriel Roubini, who through a teleconference criticized emerging markets, including Argentina, for having advance “state capitalism” models, a course that “is not positive in the long run.”
The analyst criticized methods of trade protectionism, imposition of capital controls and expropriations, which generate a “negative impact” on the confidence of investors and “slow economic growth.”
Roubini said a model of state capitalism is that which “distances itself from market-oriented policies.”
“Argentina is unfortunately moving in this direction,” the economist said, affirming that “the country’s growth this year will be between 2 and 3%” which he called “mediocre.”
El Cronista
Exchange bondholders: They say that Argentina can pay the vultures and they ask that they receive just 1% if disbursements are blocked
Tuesday, November 20, 2012
By Laura Garcia
Their interests aligned. But history weighs. And while today they are defending a common position with Argentina in the battle with the vulture funds, the bondholders of the swap are drawing a line. It’s a shame that Argentina doesn’t want to pay the plaintiffs but it’s not our fault, they insisted on Friday in their latest filing before the judge. They don’t support the decision and they state that, if it wanted to, Argentina could do it.
“The complaint of the plaintiffs is not far because it ignores completely the bondholders that have warrants that already suffered haircuts of more than 70 cents on the dollar. These discounts, which were accepted by 92% of the bondholders and gave the Republic relief in debt terms for tens of billions, which is one of the main reasons why today they have sufficient international reserves to honor their obligations of any kind, including with the plaintiffs,” they said in a document that was filed on Friday before Judge Thomas Griesa.
But their central argument is another: “A judicial trap designed to ensure a remedy for the plaintiffs is entirely appropriate. But what is legitimate and exclusive property of the bondholders cannot and should not be used as the cheese.” Aligned interests, it was clear, does not mean affinity. Much less absence of tension.
“The court should do everything possible to avoid a situation in which the non-payment of the plaintiffs of some US$1.3 billion snowballs and becomes a crisis of US$10 billion for innocent third parties,” said the attorneys for the bondholders, led by Gramercy. Gramercy organized the restructuring of 2010 and swapped debt for an approximate nominal value of US$2.7 billion.
Currently, they hold warrants from the swap for a nominal value that is more than US$400 million. The group of bondholders in the lead has some US$1 billion in restructured Argentine debt, according to the legal filing. Another eight funds were interested in joining but didn’t have enough time.
“There is no doubt that the exchange bondholders are in their right to collect on time with those payments, once transferred by the Republic to the Bank of New York in Argentina they are the legal and exclusive property of the bondholders. It is also out of this discussion around the Republican not paying the plaintiffs. The court (of the Second Circuit) has repeated and emphatically made clear, and in the last filing of the plaintiffs it shows that the Republican is never going to pay them. This is unfortunate but it has nothing to do with the actions of innocent exchange bondholders,” they said in case the strategy of “defending your own” could be confused with an endorsement of Argentina’s position.
Possible catalysm
The bondholders are speculating in their filing with the two “realistic responses” by Argentine in this situation.
“The first scenario is that the Republic pays what it owes to the bondholders of the swap to the Bank of New York but refuses to pay the plaintiffs. According to the complaint of the latter, the bondholders’ funds, which are their indisputable property, would be frozen for an indefinite time. The only plausible alternative would be for the Republic to refuse to pay the Bank of New York the amount it owes to the bondholders. If this would occur, the ruling would turn a relatively minor default into a kind of cataclysm that would only destabilize an already fragile global economy and undoubtedly set off an avalanche of new lawsuits that would involve the bondholders, multiple banks and the Republic, which could be the anticipate consequence by the motion of the plaintiffs,” they risked to say.
The 0.92% formula
“While the plaintiffs have the right to reject the haircuts, it would go against all fairness for the Republic to take advantage of the sacrifice made by the exchange bondholders so that the most aggressive and litigious bondholders could receive more than 200 cents on the dollar,” they said.
In an interview with El Cronista, one of its representatives, involved in the filing on Friday, explained: “We are arguing that third parties should not be affected by Griesa’s decision over questions of fairness like the fact that it would violate our fifth-amendment constitutional rights. So, neither the interest nor the payments of coupons that correspond to the exchange bondholders should be used to satisfy the plaintiffs. But in the event that the judge disagrees with this idea, and decides to apply the sentence to third parties, we then suggest the payment be limited to 0.92%.”
According to the filing made on Friday, the vulture funds should receive “a payment proportional to the holdings as a fraction of the total debt in default. So, if the plaintiffs have warrants for a nominal value of US$428 million, and the defaulted bonds of the Republic subject to the pari passu clause come to approximately US$46 billion, so the court should require a payment to the plaintiffs of no more than 0.92% (US$428 million/US$46 billion) of the amount of any payment made to the bondholders.”
Ambito Financiero
Vulture funds to Griesa: “Speed up solution to the case”
Tuesday, November 20, 2012
The vulture funds that are suing Argentina in New York yesterday made a new filing before Judge Thomas Griesa: they asked to collect the totality of the bonds that fell into default for more than US$1.3 billion and that, by their own decision, didn’t enter the two debt swaps that were orchestrated by the government in 2005 and 2010.
They also asked him to resolve the case with the greatest speed possible, taking into account that on December 2 interest on the Global 2017 bond is coming due, a warrant that was issued in the last swap of 2010 for bondholders that entered it. The holdouts have the intention to, on that date, be able to also collect. In the middle of the month the annual GDP coupon payment has to be made, for more than US$3 billion.
Also, they alleged in the point around “third parties” that it’s a punctual case against Argentina, and that there would be no other parties harmed in the case, like Bank of New York Mellon. That entity acts as a trustee and is the one that effectively pays the bondholders that entered the restructuring. Griesa will have to respond before December 1 and send his ruling again to the Court of Appeals.
Ecademy
Tuesday, November 20, 2012
By Lucas Wyrsch
Dear Ecademists,
When Eduardo Duhalde derogated the fixed exchange rate established by Carlos Menem, Argentina's economic crisis began to end by the late 2002, under the management of the minister of Economy Roberto Lavagna.
Following the economic policies laid by Duhalde and Lavagna, Nestor Kirchner ended the economic crisis, getting fiscal and trade surpluses.
However, he distanced from Duhalde once getting to power.
He promoted as well the reopening of judicial actions against the crimes of the Dirty War.
MercoPress
Tuesday, November 20, 2012
We have an obligation and a commitment to our creditors, who are those who accepted the debt-swaps offered in 2005 and 2010”, Lorenzino said in an interview published by Buenos Aires newspaper Página/12.
The statements came after the presentation by Argentina to New York Judge Thomas Griesa to maintain his order blocking payment on defaulted sovereign bonds to holdout investors until lingering questions are settled in a higher court's appeals process.
Lorenzino also warned that “some are betting a lot of money to get rating agencies say that Argentina defaulted on its obligations since, whether that happens or not, then they’ll be able to cash insurances they bought in the market.”
Business Insider
Monday, November 19, 2012
By Linette Lopez
Here's what you have to understand: Argentina isn't refusing to pay angry hedge fund managers like Elliott Capital's Paul Singer because they don't have the money. They do.
The country's intransigence comes from a force far more powerful than that — the fabric of their modern political ideology.
"This was a political decision haded leaders made," said bankruptcy expert William A. Brandt, CEO of Development Specialists Inc., a firm specializing in turnarounds. "Argentina is an incredibly sophisticated economy and brought this problem on itself by doing the unthinkable and defaulting on its debt."
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