Dienstag, 30. April 2013
Geierfonds lehnen argentinisches Angebot ab Die Investment-Fonds, die in New York gegen den argentinischen Staat klagen, und dabei die volle Zahlung der u$s 1,3 Mrd. fordern, die das Kapital und die angelaufenen Zinsen ihrer argentinischen Bonds ausmachen, haben die argentinische Offerte abgelehnt, ihnen das Gleiche zu zahlen, wie denjenigen, die sich der zweiten Umschuldungsrunde im Jahr 2010 angeschlossen haben
Arg. Tageblatt vom 20.04.13 – Seiten 18+19
Geierfonds lehnen argentinisches Angebot ab
Die Investment-Fonds, die in New York
gegen den argentinischen Staat klagen, und
dabei die volle Zahlung der u$s 1,3 Mrd. fordern,
die das Kapital und die angelaufenen Zinsen ihrer
argentinischen Bonds ausmachen, haben die argentinische
Offerte abgelehnt, ihnen das Gleiche zu zahlen, wie
denjenigen, die sich der zweiten Umschuldungsrunde im
Jahr 2010 angeschlossen haben. Die Fonds behaupten, dass
sie dabei schliesslich etwa 15% des Betrages erhalten würden.
Denn die etwa 30%, die angeboten werden, werden
in langfristigen Staatspapieren mit niedriger Verzinsung
gezahlt, deren Marktwert sehr niedrig ist.
Die Berufungskammer muss somit jetzt entscheiden.
Die Anwälte der Fonds erwarten ein Urteil für Ende Mai
oder Anfang Juni.
Das Gericht kann jetzt kaum anders
urteilen, als den argentinischen Staat zur vollen Zahlung
zu verurteilen. Da es kein Konkursrecht für Staaten gibt,
können die Gläubiger, die sich den Umschuldungsangeboten
von 2005 und 2010 nicht angeschlossen haben,
nicht gezwungen werden, die gleichen Bedingungen anzunehmen.
Argentnien wird dann voraussichtlich Berufung einlegen.
Aber es bestehen Zweifel, ob der Oberste Gerichtshof
den Fall annimmt. In den USA ist die Möglichkeit der
Berufung vor der obersten gerichtlichen Instanz viel beschränkter
als in Argentinien. Es muss sich im Wesen um
Verfassungskonflikte oder juristische Grundsatzfragen
handeln. Und das ist bei der Klage, um die es hier geht,
nicht der Fall.
Wenn somit Argentinien zur vollen Zahlung verurteilt
wird, tritt das Urteil von Richter Thomas Griesa in Kraft,
gemäss dem der Betrag, den die argentinische Regierung
der Bank of New York überweist, damit sie den Inhabern
der neuen Bonds Zinsen und Amortisationsraten zahlt,
auch zur Zahlung an die Fonds bestimmt werden, die
diesen Prozess gewonnen haben. Somit erhalten sowohl
die Inhaber der umgeschuldeten Bonds, wie die der alten,
den gleichen Prozensatz auf den Betrag, den sie theoretisch
erhalten müssen. Das hat Griesa als “pari passu”
bezeichnet.
Es ist dabei auch möglich, dass der argentinische
Staat bei dieser Konstellation überhaupt nichts zahlt.
Der Umstand, dass die Inhaber der neuen Bonds dann
nur einen Teil des Betrages erhalten, der ihnen zusteht,
eventuell sogar gar nichts, wird als technischer Default
bezeichnet.
Das würde Argentinien total aus der internationalen
Finanzwelt ausschliessen, was für die Wirtschaft
schlimm wäre. Argentinien sollte sich um eine Rückkehr
zur Welt bemühen, doch die Regierung geht genau in die
entgegengesetzte Richtung. Offensichtlich hält CFK die
Abschottung von der Welt für richtig.
Die argentinische Regierung kann aber auch den Betrag,
den sie der Bank of New York überweist, erhöhen, sodass
die Inhaber der neuen Bonds voll ausgezahlt werden,
und die Geierfonds, die die Klage gewonnen haben, auch.
Wie immer die Regierung handelt, kann damit gerechnet
werden, dass die anderen Holdouts sich jetzt auch vor
Gericht melden, wobei der Prozess einfacher ist, weil die
US-Justiz schon die grundsätzliche Entscheidung getroffen
hat. Insgesamt halten die Holdouts, einschliesslich der
jetzt klagenden Geierfonds, an Kapital und angelaufenen
Zinsen, über u$s 11 Mrd.
Das gerichtliche Verfahren kann eventuell weitergehen.
Wenn der Oberste Gerichtshof die Berufung annimmt
oder die Ablehnung hinausschiebt, besteht eine neue Galgenfrist.
Am 31. Dezember 2014 läuft dann die Klausel ab,
die die argentinische Regierung zwingt, den Inhabern von
umgeschuldeten Staatspapieren die Differenz zu zahlen,
bis zum Betrag den die Holdouts schliesslich erhalten. Diese
Klausel heisst in den USA RUFO (Rights Upon Future
Offers). Das gibt der argentinischen Regierung die Möglichkeit, ab 1. Januar 2015 ein Angebot an die Holdouts zu machen, bei dem diese mehr als diejenigen erhalten, die
sich den Umschuldungsangeboten angeschlossen haben.
Es wird angenommen, dass sich die Fonds zufrieden geben,
wenn sie einen Teil der Differenz erhalten, also z.B.
u$s 20 oder u$s 40 pro Bond, so dass es dann insgesamt
um die u$s 50 bis u$s 70 wären.
Der lokale Anwalt Eugenio Bruno, einer der besten
Spezialisten in dieser Materie, weist darauf hin, dass schon
vorher ein Abkommen dieser Art erreicht werden kann.
Er bezieht sich auf die sogenannte “settlement-Klausel”,
die wirksam wird, sobald das Gesetz ausser Kraft gesetzt
wird, das eine neue Umschuldungsrunde verbietet. Bruno
meint, dann könne mit den Holdouts über eine Zusatzzahlung
verhandelt werden, die jedoch von den zuständigen
US-Richtern genehmigt werden muss. Denn dann ist es
nicht die argentinische Regierung, die beschliesst, den
Holdouts mehr zu zahlen, sondern ein US-Richter, dessen
Urteil die argentinische Regierung befolgen muss.
Die argentinische Regierung müsste schon jetzt aussergerichtliche
Verhandlungen mit den Holdouts, besonders
mit den aggressiven Geierfonds, einleiten, um zu einer
Kompromisslösung zu gelangen. Das müsste sehr diskret
geschehen, über die Anwälte der argentinischen Regierung
in New York und/oder andere Vermittler. Soweit bekannt
ist, ist dieser Weg nicht eingeleitet worden. CFK und ihre
Mannschaft denken offensichtlich nicht so weit. Sie sind
und bleiben stur.
Hier wäre es auch wichtig, dass die US-Regierung sich
über einen sogenannten “amicus curiae” über den Fall
äussert und dem Richter empfiehlt, zu einer Kompromisslösung
zu gelangen, die Argentinien die Überwindung des
Defaultzustandes erleichtert. Dazu sind gute Beziehungen
zur US-Regierung notwendig. Doch CFK bemüht sich
gewiss nicht in diesem Sinn, obwohl die US-Regierung
stets guten Willen zeigt, Argentinien zu helfen, den
Defaultzustand zu überwinden, und schon vor in einer
formellen Angelegenheit bei diesem Verfahren zu einem
„amicus curiae“ gegriffen hat. Allein, das Abkommen mit
Iran geht in die entgegengesetzte Richtung, und auch sonst
besteht keine freundschaftliche Haltung.
Die Holdouts machen leicht unter 7% der gesamten
argentinischen Staatsschuld aus, die bei der Umschuldung
von 2005 in Frage kam. Das schliesst Geierfonds ein, die
die Bonds auf dem Markt zu Schleuderpreisen gekauft
haben, aber auch andere, die sie bei der Ausgabe oder
danach, vor der Defaulterklärung von Ende 2001, erworben
haben. Nebenbei bemerkt: dass die Bonds sehr billig
gekauft wurden und bei voller Zahlung ein anormal hoher
Gewinn entsteht, ist ein ethisches aber kein juristisches
Argument.
Solange Argentinien dieses Problem nicht löst, befindet
sich das Land weiter im Defaultzustand, was ein formelles
Hindernis für die Aufnahme von Bankkrediten im
Ausland, aber faktisch auch für Auslandsinvestitionen
im allgemeinen darstellt. Ebenfals werden dann die Verfahren
zur Beschlagnahme von Vermögen des argentinischen
Staates im Ausland intensiver weitergehen, wobei
die Gefahr besteht, dass der Begriff der nicht pfändbaren
Güter (wie ZB-Reserven und diplomatische Güter) eingeschränkt
wird, was u.a. die Filialen der Banco Nación in
den USA betreffen könnte. Und wenn ein neuer Default
hinzukommt, auch wenn er als technisch (also nicht als
politische Entscheidung der argentinischen Regierung)
bezeichnet wird, ist der Fall noch schlimmer.
Mittwoch, 24. April 2013
Wo bleibt die fiktive Quellensteuer von 15% bei Verkauf der argentinischen Discountbonds ?
bei einem momentanen Poolfaktor von ca 1,35 sind immerhin ca 26% des Verkaufserlöses "geronnene" also kapitalisierte Zinsen die weder versteuert wurden bei den halbjährlichen Zinszahlungen noch mit 15% fiktiver Quellensteuer versüsst wurden.
Also müsste beim Verkauf von Discountbonds in der effektiven Höhe von 10.000 eine fiktive Quellensteuer vom 15% von 26% = 2.600 == 390 Währungseinheiten (es gibt Discounts in EUR / USD / ARS) gutgeschrieben werden.
Erfarhungen, Meinungen und weitere Überlegungen bitte an
rolfjkoch@web.de
------------------
Also müsste beim Verkauf von Discountbonds in der effektiven Höhe von 10.000 eine fiktive Quellensteuer vom 15% von 26% = 2.600 == 390 Währungseinheiten (es gibt Discounts in EUR / USD / ARS) gutgeschrieben werden.
Erfarhungen, Meinungen und weitere Überlegungen bitte an
rolfjkoch@web.de
------------------
Vereinfachte Definition der meldepflichtigen Zinszahlungen
Zins ist das Entgelt für ein über einen bestimmten Zeitraum zur Nutzung überlassenes Sach- und Finanzgut (Geld), das der Empfangende (Schuldner) dem Überlasser, (Gläubiger) pro Jahr zahlt.
Zinszahlungen im Sinne der EU-Zinsrichtlinie sind die gezahlten oder einem Konto gutgeschriebenen Zinsen, die mit Forderungen jeglicher Art zusammenhängen, unabhängig davon, ob diese grundpfandrechtlich gesichert sind oder nicht und ob sie ein Recht auf Beteiligung am Gewinn des Schuldners beinhalten oder nicht. Beispielsweise fallen Erträge aus Spareinlagen, Festgeldern, Staatsanleihen oder sonstigen Schuldverschreibungen unter den Zinsbegriff.
Meldepflichtig sind weiterhin Zinsen, die von Investmentfonds ausgeschüttet werden. Liegen der Zahlstelle keine Informationen über den Zinsanteil vor (z.B. weil der Investmentfonds diese Informationen nicht veröffentlicht), gilt die gesamte Ausschüttung als Zinszahlung.
Schließlich werden die aufgelaufenen oder kapitalisierten Zinsen erfasst, die bei der Veräußerung einer auf- oder abgezinsten Forderung (z.B. Nullkuponanleihe oder Bundesschatzbrief Typ B) anfallen. Das Gleiche gilt für die Zinserträge, die realisiert werden bei der Veräußerung von Anteilen an Investmentfonds, die mehr als 40 % (ab 2011: 25 %) in verzinsliche Forderungen investiert haben. Liegen der Zahlstelle keine Informationen über die Zusammensetzung des Vermögens des Investmentfonds vor, gilt die genannte Grenze als überschritten. Aus Vereinfachungsgründen hat Deutschland zugunsten der Zahlstellen von einer Wahlmöglichkeit in Artikel 8 Absatz 2 Satz 2 der EU-Zinsrichtlinie Gebrauch gemacht, nach der in Veräußerungsfällen der Gesamtbetrag des Erlöses aus der Veräußerung gemeldet wird. D.h. die Zahlstelle braucht nicht den Zinsanteil zu ermitteln, was im Einzelfall komplex und zeitaufwändig sein kann, sondern teilt den vollen Veräußerungserlös mit. Diese Information kann von den Finanzbehörden im Ansässigkeitsstaat des wirtschaftlichen Eigentümers nicht unmittelbar der Besteuerung zu Grunde gelegt werden, sondern es bedarf weitergehender Sachverhaltsermittlungen unter Berücksichtigung des jeweiligen nationalen Steuerrechts um den Anteil von steuerpflichtigen Erträgen zu ermitteln.
When Cipriano Castro, a fearsomely mustachioed strongman from the Andes, seized power in Venezuela in 1899 and defaulted on the government’s foreign debts, the jilted European powers knew how to react: they sent the warships, which bombarded and blockaded the country until a settlement was reached.
When Cipriano Castro, a fearsomely mustachioed strongman from the Andes, seized power in Venezuela in 1899 and defaulted on the government’s foreign debts, the jilted European powers knew how to react: they sent the warships, which bombarded and blockaded the country until a settlement was reached.
Markets: An unforgiven debt
A US ruling against Argentina could switch initiative in bond markets back to creditors
When Cipriano Castro, a fearsomely mustachioed strongman from the Andes, seized power in Venezuela in 1899 and defaulted on the government’s foreign debts, the jilted European powers knew how to react: they sent the warships, which bombarded and blockaded the country until a settlement was reached.
The enforcement of creditor rights in sovereign debt restructurings has since become less violent. Gunboats gradually became an unacceptable way of collecting debts. For much of the past century, governments have largely been able to renege on their debts with a degree of impunity, albeit not without some pain.
ON THIS STORY
- Analysis Debt – Argentina’s long-festering wound
- Brazil warns on Argentina debt ruling
- Argentina debt repayment order frozen
- beyondbrics Argentina vs vultures
- beyondbrics Argentina - no default for now
ON THIS TOPIC
- US creditors reject Argentina’s debt offer
- Media law ruling irks Argentina government
- Fernández feels political pressure
- Argentina’s creditors face deal deadline
IN ANALYSIS
- Latvia Reaching for the euro
- Commodities Against the grain
- Brazil The creaking champions
- Gold Losing its charm?
Yet a decision last week by a New York court could swing the pendulum back towards creditors. Although the case may still end up in the US Supreme Court, the ruling potentially erodes the ability of countries to spurn creditors – and could embolden those hedge funds, known as vultures, that specialise in suing recalcitrant governments.
The case in question is a long-running legal battle between Argentina and several so-called vulture fundsthat refused to join the 93 per cent of creditors that agreed to the punitive restructuring that followed the country’s 2001 default. The US courts have ruled unexpectedly harshly against Argentina, rattling markets and throwing money managers, lawyers and analysts into a spasm of speculation.
“This has the potential to break the paradigm of the sovereign debt world,” says Hans Humes of Greylock Capital Management, a fund that specialises in emerging markets. Mr Humes co-chaired the committee of Argentina’s bondholders and sat on Greece’s creditor committee during its restructuring this year.
“Creditor rights have been methodically stripped away in recent years, but this may bring us back,” he says.
Elliott Associates, the main hedge fund plaintiff, is run by Paul Singer, the US billionaire, and has made extracting money from defaulting governments its calling card. Elliott won the Argentine case through an arguably novel interpretation of a Latin phrase: pari passu. It means “on equal footing” or “in equal step” and is a venerable legal clause in bonds and loans.
In corporate bankruptcies, pari passu creditors rank equally in the queue when companies are dissolved, the assets are sold and proceeds disbursed to lenders. Although countries do not go into bankruptcy, the clause has long featured in government bonds and loans even though lawyers disagree on the clause’s meaning and importance, says Mitu Gulati, a law professor at Duke University and former lawyer at Cleary Gottlieb, Argentina’s counsel.
Argentina’s long-festering wound
Argentina has struggled to manage its money throughout its two centuries as an independent nation – and was once so hard-up it tried to swap the Falkland Islands for its debt, writes Jude Webber.
It received its first loan, from Britain, in 1824 but had defaulted by 1890. In 1949 it declared itself debt-free and was even a creditor to Italy, Finland, Belgium and Romania, which had been devastated by war. But by 2001 it had racked up the world’s biggest sovereign default by halting payment on nearly $100bn of foreign debt.
To continue reading, click here
Elliott and Aurelius Capital, its co-plaintiff, founded by a former Elliott trader, successfully argued that the pari passu clause in their defaulted bonds meant that Argentina could not continue to ignore them while paying the holders of its restructured debt.
But District Court Judge Thomas Griesa went further than just finding in favour of the hedge funds. Lawyers say he broke new ground in how widely the clause can be interpreted, and how far creditors can go in seeking redress from defaulting countries.
Lenders can win legal cases against countries, but winning compensation is trickier. Most overseas government assets are protected by sovereign immunity. Vultures typically try to create such legal bother that countries eventually pay them to go away.
But this so-called holdout strategy depends on extreme patience and deep pockets. Argentina, for example, has largely been able to thumb its nose at creditors for almost a decade. Elliott has proved a dogged adversary and even seized an Argentine navy training ship in October after it docked in Ghana. But despite this forceful demonstration of willpower, Elliot has so far failed to extract a single peso from Buenos Aires.
By contrast, Judge Griesa has backed up the bark of his ruling with a sharp bite that may bolster the hedge funds in their showdown with Argentina. The injunction prohibited third parties from “aiding and abetting” any violation of his order.
This was primarily aimed at Bank of New York Mellon, the conduit of Argentina’s payments to the holders of its restructured debts. Unless the appeals court intervenes, Argentina must pay Elliott and the other plaintiffs more than $1.3bn by December 15, BNY Mellon will breach the injunction if it transfers regular payments to Argentina’s lenders due on the same date.
BNY Mellon is unlikely to defy the court, so this essentially means that unless Argentina pays the vulture funds it could default on its international debts once more. Lawyers say that Judge Griesa’s legal dragnet leaves little room for escape, though Argentina and holders of restructured bonds have filed emergency appeals. It also applies to parties in the payments system – the economy’s circulatory system – including overseas clearing houses such as Euroclear.
This has far-reaching implications, says Anna Gelpern, a law professor at American University and Georgetown, previously of the US Treasury and Cleary Gottlieb.
“Grabbing a ship in Ghana is serious, but still a serious nuisance. In contrast, the ability of holdouts to seize money in the payments system is of systemic importance,” Ms Gelpern says. “Gunboats could target individual countries but targeting the payments system is an entirely different kettle of fish.”
In a similar case in 2004, the New York Federal Reserve argued that the vulture funds’ methods represented “terrorism of payments and settlement systems”.Euroclear says it is monitoring the case “closely” but does “not intend to breach this US court order”.
Argentina’s restructured bondholders have reacted with fury, and have hired David Boies, the celebrated litigator who represented Al Gore in the Supreme Court case that decided the 2000 presidential election. In an odd twist, Elliott’s lawyer is Ted Olson, the former US solicitor general who represented George W. Bush.
In the motion to avert the injunction, the bondholders’ lawyers attacked Judge Griesa’s “level of rancour” against Argentina and argued that it could damage foreign relations.
. . .
Other powerful actors could also intervene. Whitney Debevoise, a partner at Arnold & Porter and the former US executive director of the World Bank, argues that the court’s interpretation of pari passu could lead to challenges of the protected status multinational organisations such as the World Bank and the International Monetary Fund enjoy in debt restructurings.
This “seniority” is a longstanding custom that has never been tested. Indeed, even Elliott stated that “commercial creditors never were nor could be on equal footing with the multinational organisations”.
Thomas Laryea, a partner at SNR Denton, the law firm, and former assistant general counsel at the IMF, argues that the official sector’s protection is unharmed by the pari passu argument, and says “the court did a job of avoiding a hot potato”.
Despite the uproar the court case has already caused, many experts caution that the impact could still prove to be limited outside legal academia. They point out several factors that limit its usefulness as a precedent.
The wording of pari passu clauses vary from contract to contract. Argentina’s bonds implied a promise of equal payment, not just equal ranking. This was clearly violated by Argentina’s so-called lock law that in effect prohibits payments to holdouts. Although the courts did not base their rulings on the law, it made a breach much more obvious. Lawyers say other pari passu clause cases may be harder to argue.
Argentina’s obstinacy also makes it an outlier in the history of sovereign restructurings. Most countries quickly – or eventually – pay off holdouts, and restructurings go relatively smoothly despite the presence of vultures, says Charles Blitzer, a former IMF official. Greece, for example, restructured its larger local debts but has chosen to pay international law bonds in full to avoid costly and destabilising suits.
Argentina, on the other hand, boasts a debt museum in Buenos Aires that charts its chequered history of defaults and a board game called Eternal Debt in which players are asked: “Can you beat the IMF?”
The US courts have also argued that the broad interpretation of pari passu will not thwart future sovereign restructurings, pointing out that since 2005 the vast majority of New York law bonds have included collective action clauses. These allow a certain majority of bondholders to force holdouts to sign up to an agreed settlement.
Most of all, the Argentine saga has further to run. The appeals court still has to approve whether third parties and bondholders’ payments can be forcibly enlisted by Judge Griesa to put pressure on Argentina.
Argentina has vowed to appeal all the way to the US Supreme Court if necessary. The highest court normally does not hear contract interpretation cases of this kind but could do so if it thinks the ruling could have a systemic impact on the payments system and the international bond market.
Most sovereign law and restructuring experts agree that the case will inevitably have repercussions.
Collective action clauses, for example, are no panacea because they largely apply only to individual bonds, not a country’s overall debt burden. Hedge funds can still play holdout by gaining a blocking minority in one bond, making a restructuring of that instrument impossible.
. . .
Anne Krueger, a former senior official at the IMF and chief economist at the World Bank, now a professor of economics at Johns Hopkins University, argues that the case “clearly represents an erosion of sovereign immunity” that will embolden vulture funds in the future.
“Unless the Griesa ruling is overturned, this will open up a can of worms that will have to be dealt with,” she warns. “I don’t think it will be a revolution, as enough people have an interest in preserving the status quo. But it will have an impact.”
This may not necessarily be a negative development. Countries will still hold most of the aces in restructurings. The IMF has tallied more than 600 sovereign restructurings in 95 countries between 1950 and 2010. Giving creditors at least one trump to play may on the margins encourage better behaviour.
Any government concerned by the case’s implications can modify or remove the pari passu clauses in future bonds or avoid the New York jurisdiction altogether – perhaps in favour of London, where courts could choose to disregard the US precedent.
A side-effect may be to encourage vulture funds. But in spite of the opprobrium being heaped on these investors, experts for the most part agree that the problems they cause are outweighed by the benefits they bring: Funds such as Elliott are the “bad cops” of sovereign bond markets. The threat of legal battles makes defaults less attractive and encourages countries to treat creditors slightly better when they do have to restructure.
“I wonder why other sovereigns don’t gang up on Argentina and say, ‘for God’s sake stop this, you’re ruining it for all of us,” says one experienced sovereign restructuring expert. “I’ve been doing sovereign restructurings for 30 years and countries have generally had it good. That could change now.”
Elliott has successfully argued that an obscure bond clause called pari passu that promises equal treatment of creditors prevents Argentina from paying its restructured bondholders but not Elliott. An appeals court is expected to confirm the judgment soon.
April 24, 2013 10:09 am
Vulture funds come under sovereign fire
Vultures, parasites, pirates and loan sharks. Investors that snap up the debts of countries in financial distress in an attempt to profit from an eventual restructuring are often maligned by their supposed prey.
Such a strategy is more kindly described as “holding out”. Holdouts are typically – but not always – hedge funds that buy defaulted government debts on the cheap and refuse to join in a restructuring, “holding out” for a better deal. Sometimes they sue for the full amount.
ON THIS TOPIC
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IN CAPITAL MARKETS
The strategy can be phenomenally profitable, but it is also risky and difficult. Critics say holdouts make it harder for stricken countries to restructure their debts.
Argentina’s recent legal defeats at the hands of Elliott Management, a hedge fund that has made suing governments a calling card, have exacerbated those concerns. But do holdouts really sabotage sovereign restructurings?
Not much, argues a recent report by Moody’s. After studying 34 bond restructurings over the past decade and a half, the rating agency has concluded that fears that holdouts undermine smooth sovereign restructurings are “exaggerated”.
The finding is unsurprising. Essentially, holdouts are free-riders that want restructurings to go ahead, so that paying them in full is merely an annoyance, part of the routine cost of sovereign debt workouts.
If too many creditors hold out, restructurings fail and no one gets paid. Indeed, most bondholders are banks and asset managers that tend to sign up to restructurings, almost irrespective of how harsh the terms.
There are downsides for holdouts. Those that agree to a restructuring might get a “haircut”, but get liquid, tradeable bonds in return. Holdouts may be repaid in full, but often only at the maturity of the original bond – which could be years away. Meanwhile, their securities are exceptionally illiquid.
For the countries involved, it is often easier to pay off holdouts. Although it is extremely difficult to collect on legal judgments against governments, holdouts can create legal headaches that most want to avoid.
“Worries over holdouts are usually overdone,” says Charles Blitzer, a former official at the International Monetary Fund that worked on several government debt workouts. “Bond restructurings have generally concluded quickly and with overwhelming participation by creditors. If there are any holdouts, they rarely rock the boat.”
For example, when Greece restructured almost €200bn of bonds last year, investors with roughly €6.4bn of Greek bonds decided to hold out. They were overwhelmingly concentrated in harder-to-restructure international law bonds, so Athens has so far elected to repay all holdouts in full.
Nonetheless, there are growing concerns that Argentina’s case may shift the incentives in favour of holding out, and upset the run of relatively smooth restructurings.
Elliott has successfully argued that an obscure bond clause called pari passu that promises equal treatment of creditors prevents Argentina from paying its restructured bondholders but not Elliott. An appeals court is expected to confirm the judgment soon.
This could prove pivotal for future restructurings, by handing holdouts a precedent. If countries do not pay them, holdouts can in theory hold payments to restructured bondholders “hostage”. But by potentially emboldening more creditors to hold out, it may make future restructurings harder to complete.
“Before you could credibly threaten to not pay holdouts, but this case makes that much more difficult,” says one European official who has studied holdouts. “If this goes through it will be a hugely powerful instrument.”
Elliott, Moody’s and others argue that “collective action clauses” – which allow a majority of bondholders to force an agreement on all – mean that the Argentine case will have little or no fallout, however.
These clauses have become more common and are now embedded in almost all international bonds. Local law bonds can be retroactively fitted with CACs, as Greece did with its domestic debts.
Still, CACs are no panacea. Although bondholders have tended to overwhelmingly vote in favour of restructurings, the Argentine precedent could make creditors more inclined to hold out.
Moreover, CACs are usually individual to each bond. Determined hedge funds can to snap up a blocking stake, typically 25 per cent, to prevent a restructuring of that specific security – a tactic holdouts used with many of Greece’s international bonds.
Although still uncommon, litigation is on the rise. Three German academics – Julian Schumacher, Christoph Trebesch and Henrik Enderlein – have counted only 108 creditor lawsuits between 1976 and 2010, but more than half of those have been filed since 2000.
The German study also found that the lawsuits are increasingly being filed by hedge funds rather than banks and traditional asset managers. They typically sue for longer, and for bigger amounts. Many experts fear the Argentine precedent could embolden them further, upsetting the restructuring apple cart.
EMTA's Forum in Buenos Aires will take place on Tuesday, May 21, 2013.
EMTA's Forum in Buenos Aires will take place on Tuesday, May 21, 2013.
Puente will host the event at Hotel Emperador, Av. del Libertador 420, in Buenos Aires, Argentina, beginning at 3:30 pm.
This event will cover the global economic outlook, growth prospects for Argentina, and the investment opportunities in Latin America.
Panelists will include:
Daniel Marx (Quantum Finanzas) – Moderator
Pablo J. Santiago (Banco Mariva)
Ricardo Maxit (Galileo Argentina SGFCI)
Javier Finkman (HSBC Global Research)
Juan Jose Ciro (Puente)
Luis Celasco (RJ Delta)
Attendance is complimentary for EMTA Members. The registration fee for non-members is US$295.
Registration
To register, please CLICK HERE if you have previously registered for an EMTA event or you are an EMTA member with login credentials.
Or, if you have never before registered for an EMTA event or you are an EMTA member without login credentials, please CLICKHERE.
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And this week, on April 18, Secretary of State John Kerry asked Argentina to "normalize its relations" with its various creditors. // Argentina is expected to appeal to the Supreme Court, and the U.S. Solicitor General's office has indicated it may write an amicus curiae brief in support of the Supreme Court hearing the case.
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An important theme in the ongoing litigation in U.S. courts over Argentina's 2005 sovereign debt restructuring is the impact of "holdout" creditors on future restructurings. On April 10, 2013, Moody's released a report and announced its key finding, that "[H]oldout creditors have not been an obstacle to sovereign debt restructurings." The report, 'The Role of Holdout Creditors and CACs in Sovereign Debt Restructurings,' examined 34 instances of sovereign debt default since 1997. Moody's concluded that creditors who declined an initial offer and held out for more favorable terms have affected only two of the 34 bond exchanges. In both of those cases, Argentina (2005) and Dominica (2004), large numbers of creditors -- about a quarter of all creditors -- demanded a better offer. Moody's also found that Argentina was a unique case in the "unilateral" and "coercive" character of its government's approach to the restructuring. | |||
The IIF continued: "Since private sector creditors and investors cannot afford to wait forever, many (but not all including thousands of retail investors) have been compelled to accept Argentina's exchange offers in 2005 and 2010. Official bilateral creditors in the Paris Club on the other hand have consistently rejected Argentina's restructuring offers. Moreover, Argentina has disregarded its international treaty obligations including to the IMF and the World Bank. Fortunately, this has been a very rare case in the recent history of sovereign debt restructuring.In every other case of the eleven sovereign debt restructuring episodes in recent times, the sovereign debtor has been able to negotiate with private creditors for a mutually acceptable restructuring deal on a fairly timely and orderly basis." In 2001, Argentina announced the largest sovereign debt default in history. For more than four years, the Argentine government declined to negotiate with its U.S. and other lenders; it then issued a take-it-or-leave-it offer in 2005. When nearly one-half of all foreign lenders (or about one-quarter of all of Argentina's creditors) declined the offer – including U.S. pension funds and others holding several billions of dollars of the debt – the Argentine government took the unprecedented step of summarily repudiating those debts. Today, Argentina still owes U.S. investors an estimated $3.5 billion. And this week, on April 18, Secretary of State John Kerry asked Argentina to "normalize its relations" with its various creditors.
Currently, Argentina is appealing the U.S District court's decision in bond litigation case, NML v. Argentina. Argentina contends that it is protected by the U.S. Foreign Sovereign Immunities Act. However, the 2nd U.S. Circuit Court of Appeals rejected that argument and demanded that Argentina repay its bondholders. Argentina is expected to appeal to the Supreme Court, and the U.S. Solicitor General's office has indicated it may write an amicus curiae brief in support of the Supreme Court hearing the case.
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American Task Force Argentina PO Box 3197 Arlington VA 22203-0197 Opt Out |
Dienstag, 23. April 2013
Buenos Aires Herald (Reuters) US courts make mark in Argentina creditor spat
Buenos Aires Herald (Reuters)
Tuesday, April 23, 2013
By Reynolds Holding
U.S. courts have made a clear mark in Argentina’s spat with holdout creditors. Judges have, unusually, tried to broker a deal between the Latin American nation and hedge funds still objecting to debt swaps last decade. Ordering Argentina to honoUr its agreements and pushing other countries to clarify theirs were also useful moves. Elliott Management affiliate NML Capital and other hedgies are winning this case, but the rule of law is coming out ahead.
The courts’ creativity has shown through since Argentina’s historic US$100 billion default on sovereign debt in 2002. Judge Thomas Griesa used his powers in a way that encouraged most creditors to agree on a bond exchange in 2005 and 2010. Later, after a standoff, he ordered Buenos Aires to cough up the US$1.3 billion still owed to the holdouts — taking more literally than many expected the nation’s standardized promise to treat all creditors equally. And last year he devised a clever ruling that makes it difficult for Argentina to pay creditors who exchanged bonds without also paying Elliott and the other holdouts.
Huffington Post
Monday, April 22, 2013
By Robert Raben
The U.S. Supreme Court must soon decide whether to review a series of lower-court decisions against the Republic of Argentina, and it has begun to ask the Obama administration for its views.
As a former assistant attorney general, I am familiar with the struggles and the balancing involved in weighing various legal and policy questions and deciding whether to ask the Supreme Court to review a case.
But in this case, the correct call is clear: The Argentine g
Yes! Magazine
Monday, April 22, 2013
By Eric LeCompte
Last October, soldiers from the West African nation of Ghana boarded an Argentine naval ship called the Libertad. They overtook the crew and brought the ship to port in the town of Tema. This was not an act of piracy, at least not in the sense we normally understand it. The detaining of the Libertad took place after hedge fund NML Capital convinced a Ghanaian court that the ship, which was sailing in Ghanaian jurisdiction, should be held ransom for a debt the hedge funds claimed Argentina owed them.
The saga began in 2001, when Argentina was thrown into economic crisis and defaulted on its loans. Hedge funds swooped in and bought Argentine debt for almost nothing and circled until the country was in recovery to collect the debt in full.
Wall Street Journal
Monday, April 22, 2013
By Erin McCarthy
The cost to insure Argentina's sovereign debt against default rose modestly Monday after holdout creditors rejected Argentina's proposal for payment on the country's defaulted bonds, a move that was widely expected.
The spread on Argentina's five-year credit default swaps widened to 2172 basis points from 2051 basis points Friday. Argentina's Global 2017 dollar bond also weakened in response. The bond traded at 79 to yield 15.9%, from 79.5 to yield 15.702% late Friday, according to Markit, the financial information services company.
The U.S. Supreme Court must soon decide whether to review a series of lower-court decisions against the Republic of Argentina, and it has begun to ask the Obama administration for its views.
The U.S. Supreme Court must soon decide whether to review a series of lower-court decisions against the Republic of Argentina, and it has begun to ask the Obama administration for its views.
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| In Case You Missed It: The Huffington Post Argentina's Defiance By Robert Raben, Executive Director of American Task Force Argentina April 22, 2013 The U.S. Supreme Court must soon decide whether to review a series of lower-court decisions against the Republic of Argentina, and it has begun to ask the Obama administration for its views. As a former assistant attorney general, I am familiar with the struggles and the balancing involved in weighing various legal and policy questions and deciding whether to ask the Supreme Court to review a case. But in this case, the correct call is clear: The Argentine government's behavior toward U.S. courts and U.S. judges has gone beyond contempt, and its ongoing defiance of our legal system must come to an end. Simply put, the Argentine government emphatically does not deserve the support of the U.S. government before the highest court in our land. The legal cases in question stem from a decade-long effort by the Argentine government to avoid paying its debts. In the 1990s, Argentina's democratic government borrowed billions in the international capital markets. To entice prospective lenders, Argentina issued its debt under New York law, irrevocably promising to waive its sovereign immunity and submit to the judgments of U.S. courts. These inducements were necessary, because Argentina has a long and storied history of failing to pay its obligations. In 2001, Argentina defaulted again - this time on $80 billion, which at that time was the largest sovereign default in history. But instead of engaging in the kind of good-faith negotiations that guide most sovereign-debt workouts, Argentina offered bondholders a derisory take-it-or-leave-it "exchange" amounting to dimes on the dollar. Approximately half of Argentina's foreign bondholders rejected its proposal. Since then, except for a temporary reopening of the same exchange, Argentina has steadfastly refused to pay any remaining creditors, going so far as to pass a law formally repudiating the debt. But having prospered during the last decade thanks to a commodity boom, there is no doubt that Argentina has the means to pay its unpaid creditors - its leaders simply refuse to do so. The only recourse left to Argentina's creditors was to seek enforcement in U.S. courts - and to date, those courts have handed down over 100 judgments in the creditors' favor. But Argentina's leaders have simply elected to defy these judgments. Argentina's defiance of these rulings recently crossed into the realm of the unprecedented. At a hearing last month before the Second Circuit Court of Appeals, Argentina's lawyer boorishly and openly vowed that his client "would not voluntarily obey" the court's orders. In a stunning act of public hostage-taking, the same lawyer threatened that if the court were to rule against Argentina again, then "nobody gets paid," because Argentina would simply stop paying those creditors who accepted its exchange offer. Finally, in an extraordinary insult to the judges and the United States itself, Argentina's attorney then asserted that the Argentine government would no sooner comply with a U.S. court order than the U.S. government would comply with an Iranian court order - as if the United States would ever raise money under Iranian law. Argentina's leaders have been no less defiant in their public pronouncements. Argentina's finance minister recently announced that Argentina would refuse to pay its debts "despite any ruling that could come out of any jurisdiction, in this case New York." And just days after the last court hearing, Argentine President Cristina Fernández de Kirchner thundered that the government's unpaid creditors would get "not one dollar," no matter what. Throughout, U.S. judges have stalwartly upheld the principle that our laws as written should apply equally to all who willingly submit themselves to our courts - even powerful sovereign governments. By contrast, the U.S. executive branch made the disappointing and unfortunate decision to support Argentina at the lower-court level, on the unsubstantiated grounds that holding Argentina accountable would somehow undermine the vague U.S. foreign-policy goal of promoting the orderly restructuring of defaulted sovereign debt. This misses the point: The real threat to international order and stability is Argentina's rogue behavior and the encouragement it provides to other sovereigns. Just recently, one of Portugal's leading elder statesmen cited Argentina as an example to emulate in calling on Portugal's leaders to default abruptly and leave the euro. This support for Argentina in court also works at cross-purposes to other actions taken by the federal government. For example, the administration has taken the commendable step of opposing new development loans for Argentina as an expression of disapproval for Argentina's outrageous behavior. But how can such actions be truly effective when the Kirchner administration can claim, as it has, that U.S. court filings have "validated . the general strategy of the Argentine government"? It would be downright dangerous for the Department of Justice to maintain its support for Argentina after its disgraceful displays of disrespect for the U.S. judicial system. Litigants who threaten to pick and choose the rulings they will obey threaten the rule of law itself. The administration should not give Argentina the chance to thumb its nose at our legal system on its grandest stage. Instead, it should unify its policy toward Argentina to ensure that our legal system remains the most stable and respected in the world. READ MORE (Argentina's Defiance)Robert Raben is Former Assistant Attorney General for Legislative Affairs |
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