Do they expect that Bank of New York ends up being reached by the injunction and the normal disbursement of the payments to the exchange bondholders are put at risk? –My partners that were in court the day of the hearing and heard the discussion of two and a half hours came out saying that the arguments of the intermediaries didn’t manage to convince the judges. In fact, one of the reasons by which the case was sent back to the lower court judge was the payment formula and the third parties, which is to whom the injunction could reach. Now, the fundamental decision that remains pending is that. The filing from Bank of New York was very well argued but doesn’t seem to have done it.

Lead Articles:

 

Clarin: “In Washington there is ‘disenchantment’ with Argentina’s policies” (Porzecanski Mention)

 

La Nacion: “Belief that the court request to the vultures will help Argentina’s position”

 

Clarin: “The government will pay debt of US$2.335 billion with reserves”

 

El Cronista: “The projects on the river that flooded the city depend on the vulture funds”

 

El Cronista: “Antonia Stolper: "I don’t know what the judges were expecting but it was not a new swap””

 

El Cronista: “Insurance against Argentine default falls: betting on a swap for local debt”

 

OTHER NEWS ITEMS:

• The death toll in La Plata and the surrounding areas from Tuesday night’s story has risen to 48 and is expected to rise further.  The infrastructure around the capital of Buenos Aires province is “destroyed” from the flooding, say reports.  Tens of thousands of homes are destroyed and hundreds of localities are flooded, with power still out for entire towns and still in parts of Buenos Aires city.  The scale of the tragedy has forced Cristina and Scioli into close cooperation, and their militant supporters to cool their rhetoric.  Cristina helicoptered into part of the province with camera crews waiting as she met with affected residents and viewed the damage first hand (El Cronista notes this is the first time as president she has ever visited the site of a disaster.)  Some of the residents yelled their disapproval of her, others thanked her: “The rain is not Peronist or Radical or anything, it is rain, I’m here to try to help” she said to one man who told her to leave.  As a negative counter-image, Mauricio Macri had rushed back from his vacation in Brazil on Wednesday morning to take charge of the city’s response, but in his first press conference he was pressed by reporters as to why he didn’t come back sooner, and he said what is today’s unflattering headline: “I am a public servant, I need to take time off sometimes.”
• Argentina’s dollar bonds in New York continue to get hammered on the secondary markets, and the gap between them and bonds under local legislation is widening.  However, El Cronista reports that despite the uncertainty over the NY court ruling and the destruction from Tuesday night’s story, which devastated the infrastructure of both Buenos Aires city and much of the province, dollar bonds emitted by the city and the province are holding steady on the secondary market.  The report cites the still-intense attractiveness of any asset that pays in dollars, due to the currency clamp.
• Soybean prices have fallen by more than 30 dollars in a week, cutting the Argentine harvest’s total value by US$1.5 billion.
• YPF is preparing to emit another US$2 billion in debt, according to a new CNV filing.
• La Nacion reports that disclosure documents from the Senate show that Amado Boudou has in some cases requested funds for trips that were subsequently cancelled, but it is not clear if the funds were returned.  There is also evidence of overcharging on trips, and some evidence of trips where the Vice President was, on paper, in two different places thousands of miles away on the same days.

 

 

 

TRENDING TOPICS/ARGENTINA on Twitter:

• “La Plata” is trending this morning, mostly around the disaster unfolding after Tuesday night’s storm.

 

 

Clarin

In Washington there is ‘disenchantment’ with Argentina’s policies

 

Wednesday, April 3, 2013

 

By Armando Pérez

Washington. Special Report

 

Argentina’s reputation as a secure destination for investments and a politically and economically rational state is at its lowest level in much time among U.S. investors and observers.  So was made known to members of the chamber of commerce and experts in economy who yesterday attended in Washington a talk from market analyst and American University professor, Arturo Porzecanski.

 

“Economic activity in Argentina has been stalled for more than a year.  As a result, many companies have not been able to discuss salary increases with their workers according to inflation and concerns are growing about possible layoffs,” said Porzecanski.

 

In fiscal terms, the expert lit a red light of warning over the rise in public spending since 2005.  The country had to ask for loans from the Central Bank and take money from the nationalized pension funds to cover the growing fiscal deficit.

 

According to Porzecanski, this spiral represented a growing in monetary emission of more than 40% and a decreasing of international reserves.

 

“This negatively affected inflation and investor confidence in the Argentine peso,” he said.  In statements to Clarin, he commented that in business, academic and official circles with those they relate to in the United States, they always hear repeated “complaints of disenchantment and desperation” around the news coming from Argentina, but in general there exists “a residual of good will” towards the country. 

 

“That good will is not being taken advantage of because of very harmful ideological and nationalistic attitudes, as in the past century and failed in previous eras,” he said.

 

On the issue of the vulture funds, Porzecanski believes that in Argentina the importance of the lawsuit (in the Court of Appeals in New York) and of a possible default “ still hasn’t been digested yet,” in the case that the government decides not to abide by the existing ruling that obliges it to pay the so-called vulture funds.  “The day that the country declares that it is not paying anyone, because it doesn’t want to pay a minority what it has owed them for years, that would once again throw a bucket of cold water on the financial system.”

 

 

 

La Nacion

Belief that the court request to the vultures will help Argentina’s position

Analysts consider it positive that the Court of Appeals has not totally ruled out the government’s proposal and that, on the contrary, it demands the plaintiffs to respond in writing

 

Thursday, April 04, 2013

 

By Silvia Pisani

 

The first reactions give some oxygen to the Argentine position in its judicial battle with the so-called “vulture funds” after the New York court demanded they respond “in writing” to the payment proposal formulated by the government last Friday.

 

"This is important because, in a certain way, it alters the burden of proof and put it on the plaintiffs,” explained economist Eugenio Diaz Bonilla, of the International Food Policy Research Institute (IFPR), headquartered in this city and the former Argentine representative to the Inter-American Development Bank (IADB).

 

"Now it is they who have to explain that, instead of having made a lot of money – and not losing it – they are ready to do harm to Argentina, to the Bank of New York (BoNY), the bondholders that entered in the swap, the New York market and the court.  It seems to me that the plaintiffs are now obliged to write about something that maybe they didn’t want to.”

 

As LA NACION indicated in its edition yesterday, the Court of Appeals asked the “vultures” to respond in writing to the payment proposal formulated by Argentina, and gave them until the 22nd to do so.

 

Despite that this move was one of the possibilities that the court reserved – and that it is certain that the vultures will reject the offer – the first reactions registered clear favorable expectation for the country’s position. “The court’s decision is a positive move.  In a certain way, it gives some credibility to the Argentine payment proposal,” said the firm Bulltick Capital Market in its report on the matter.

 

On the other hand, there is still uncertainty around the possibility that the court will also consult the so-called “affected third parties” to require a similar opinion from them.  The possibility of those new consults “would allow, at least, for buying time” by Argentina, said sources familiar with the process by which the speculative funds obtained a sentence, now stayed, for them to be paid no less than US$1.3 billion.  

 

The expectation was that, by being consulted, those “third parties” will again argue in favor of the Argentine position, as they already have done during the public hearing on February 27.  At that time, and from different perspectives, both the bondholders that did accept the swaps offered by the government as well as BoNY, which is the agent by which they get their dividends, argued in favor of rejecting the lower court ruling that condemned Argentina.

 

The three judges of the Court of Appeals left the door open to consult them again, once Argentina presented the details of the “payment offer,” as well as its commitment to honor it, its schedule and guarantees.  “From there, if they ask for opinions from the litigant funds, they will reject it,” said attorney Eugenio Bruno, expert in international financial litigation from the Garrido Firm.

 

They will set that position of rejection despite that some holdouts – who he didn’t identify – “are giving signs of fatigue and are in the mood to consider the proposal” of payment from Argentina, he said.  In the opposite direction, the attorney said that “with the goal of a favorable ruling” it would be “necessary” that the judges ask for a brief from BoNY to “explain how the effective trustee functions that protects” the funds sent by the government from the attachment that Judge Thomas Griesa wants to apply and that, at least for now, is stayed.

 

For that attachment to not become operative, Argentina needs BoNY to fall by the wayside of the attachment scheme imposed by Griesa in his first ruling.  But that possibility seemed to fall apart in the public hearing.  “It’s necessary to reverse that negative image,” argued Bruno, justifying the need for a new argument from the financial entity.

 

Another of the possibilities being looked at is that, also before a ruling comes out, the court takes time to consult with Griesa himself on the Argentine filing.  “It would be reasonable,” said attorney Mark Peterson, who has been following the case from the Wharton Business School.

 

But the opinions on this point are dissimilar.  “I don’t see the need for a new consult with the lower court judge when, since the moment it took the case, the court reserved the right to modify the payment formula,” said attorney Richard Samp, of the Washington Legal Foundation, when asked by LA NACION.

 

It’s not clear when the court will produce a ruling.  Strictly speaking, starting now it could do so at any time.  But the agreement is that there will be a period of “from two to three months”, a period that could extend in case new consults take place which those close to the government are confident about.

 

 

Clarin

The government will pay debt of US$2.335 billion with reserves

 

Thursday, April 04, 2013

 

As it has been doing since 2010, also this year the government will pay principal and interest maturities with international financial organizations, like the World Bank and IADB, with Central Bank reserves.  It is almost US$2.335 billion, according to Decree 309 published yesterday in the Official Bulletin.

 

Of this total, US$2.3237 billion corresponds to maturities this year and US$11.3 million to an adjustment from 2012, when it paid US$2.1903 billion.

 

In turn, the Central Bank will receive a Treasury Letter at 10 years coming due in 2023.

 

In the findings of the decree, it says that this payment is part of the debt reduction policy.  In reality, the public debt is not being altered but there is just a change in creditor.

 

The payment of debt with reserves debuted in 2006 with the payment of the IMF and then extended to the rest of the financial organizations.  Now the Central Bank has Treasury Letters and Temporary Advances for the equivalent of almost US$64 billion, which contrasts to the US$40 billion in reserves.

 

Thus, the international reserves cover 36% of the BCRA’s debt, a percentage that continues to go down with the payments this year from the reserves.

 

 

El Cronista

The projects on the river that flooded the city depend on the vulture funds

The Macri government asked for US$120 million in financing that this time will get the backing of the national government, but which is conditioned on the fight over the debt

 

Thursday, April 04, 2013

 

After the historic flooding that killed six people in the City of Buenos Aires and with still uncalculated destruction, the discussion was revived over unfinished projects in the capital’s neighborhoods that are being lashed with each storm.  The lack of funds and the issue of financing was in the center of the clashes between the government of Mauricio Macri and the Nation, while once again the city’s residents were hostage to the discussion.

 

In the midst of the fights, a push by the national government is key in the development of the most urgent water projects on Macri’s agenda.

 

The mayor is hoping that Economy Minister Hernan Lorenzino and Vice President Amado Boudou come out successfully from the liberationist effort against the vulture funds that is being debated in U.S. courts.

 

It’s that, according to sources in the city government, much of that depends on the World Bank finally granting the Macri leadership a loan of US$120 million for the Vega river project, responsible for the flooding in the neighborhood of Belgrano and its vicinity.

 

While there are other important elements in the decision – like Argentina abiding by the rulings of the ICSID and transparency in key data from INDEC, like on inflation – the fight with the vulture funds will end up being key.

 

This time the city was granted the backing of the Nation to take debt.  This guarantee is necessary because the national state must act as a backer of the credit that the City of Buenos Aires receives through government security bonds.  That means that, if in the worst of cases the city doesn’t pay, the country sells debt bonds to honor the debt commitments.  

 

In 2009, the Brazilian National Development and Social Bank (BNDES) granted a loan to the city to cover the projects in the Vega and the Medrano stream, which passes by tunnel through Saavedra and Nuñez and also is responsible for the flooding in these areas, which had an almost unprecedented strength this week.

 

At that time, the national government didn’t participate in the bidding for the projects, nor did it endorse the project presented by its opponent, Mauricio Macri.  Then, the BNDES loan fell aside and with it went the Brazilian construction firm Andrade Gutiérrez, which had been in a consortium with Vialco, of Electroingeniería, and had won the bid for the project, which meant they were harmed.

 

Now, the city’s Urban Development ministry, led by Daniel Chain, has to launch a new bidding in which it is hoped that Vialco will show up as well as other construction firms like Roggio, Iecsa, Cartellone and Ghella itself, the Italian firm that was in charge of the projects at the Maldonado stream in the neighborhood of Palermo.

 

The city government is confident that it can obtain cheap credits from the World Bank, more than advantageous for the interest rate and terms.  But due to the urgency, nor can other financing plans be ruled out, even if they are more costly.

 

 

El Cronista

Antonia Stolper: "I don’t know what the judges were expecting but it was not a new swap”

Says that Argentina didn’t make a proposal that gives the court something to work with.  And that it could have offered something better.  She warns that it will be important that the U.S. government’s attorney before the Supreme Court recommends it take the case

 

Thursday, April 04, 2013

 

By LAURA GARCÍA Buenos Aires

 

The holdout fight has brought with it a rapid course in in legal vocabulary and different technicalities.  In a few months, many Argentines interested in the vicissitudes of an unprecedented case had to get inside terrain where legal twists and turns abound.  El Cronista chatted with a first line expert in the issue to clear up some central questions of this battle that the whole world is following.  Antonia Stolper is a partner at Shearman & Sterling, a New York firm founded in 1873, which has 900 attorneys in 20 offices on four continents.  Stolper is the head of the capital markets team for the Americas.

 

There are those who read it as a positive signal the recent request from the court to the plaintiffs to respond to the Argentine payment formula.  Do you agree with this interpretation or is it a simple formality?

–No, we don’t agree with that interpretation.  The only thing that has changed is that we have more clarity in the timing, assuming of course that NML doesn’t change its position when it issues its response.

 

Argentina argues that it couldn’t offer to the vulture funds anything better than what was offered in the previous swaps due to the clause that would oblige extending any superior proposal to the exchange bondholders.   Technically, did Argentina have its hands tied in that sense?

At the end of it all, it’s seen as the legal interpretation of the clause.  It says that Argentina cannot offer something that is better in a voluntary form.  But my opinion, from the technical point of view, is that in the measure in which the court issues a ruling with something different, that doesn’t apply because it’s not a voluntary offer, it would now be a sentence.  Even the presentation of this formula, it’s not an offer of commitment but a response to the court.  In our judgment, what Argentina presented on Friday didn’t respond to what the court requested.  It didn’t make a proposal that gave the court something to work with.  Reading between the lines, we can say that they were trying to ask Argentina something intermediate.  I don’t know what the judges were thinking but it wasn’t about a new swap.  If it’s US$1.3 billion, they would have thought in 10 installments… in 20 or in 30.

 

Do they expect that Bank of New York ends up being reached by the injunction and the normal disbursement of the payments to the exchange bondholders are put at risk?

–My partners that were in court the day of the hearing and heard the discussion of two and a half hours came out saying that the arguments of the intermediaries didn’t manage to convince the judges.  In fact, one of the reasons by which the case was sent back to the lower court judge was the payment formula and the third parties, which is to whom the injunction could reach.  Now, the fundamental decision that remains pending is that.  The filing from Bank of New York was very well argued but doesn’t seem to have done it.

 

There is speculation on the market around a possible maneuver that, with legal avenues having run out, allows Argentina to continue paying the exchange bondholders and elude the effects of an eventual adverse ruling.  Do you believe it could orchestrate a strategy of that nature?

–In the short term, I don’t think so.  In the long term, it could.  Assuming that it’s covered by the injunction, Bank of New York cannot help.  Now the bondholders themselves are not reached.  The decision of the Court of Appeals in that direction was very clear in establishing that there is no “sharing” requirement, which means that they don’t have to share payments which were in contravention of the pari passu clause.  One could imagine a direction transmission with the bondholders outside the United States.  But one must think that this could lead to new holdouts.  In conclusion, in the measure of what they can do, it would end up being extremely complicated.

 

If the Court of Appeals ruling is contrary to Argentina, do you believe that Argentina will be asked to make a deposit to take the issue to the Supreme Court?

–I don’t thnk that there will be a requirement for a deposit.  Judge Thomas Griesa already asked for it once and the appellate court dismissed it.

 

And still supposing that it reaches that high court, to you expect that the stay will again be extended and allow for a bit more of a delay in the default scenario?  

–My partner, who was a Supreme Court clerk, believes that there is a 50-50 chance of it being maintained.  It’s clear that the courts gave Argentina a lot of process and tried to be fair and didn’t want to prejudice the situation.  That leads one to believe that the stay should be extended but it’s not easy to say.

 

What are the chances that the Supreme Court will accept listening to Argentina for this case?

–The only issue for the Supreme Court to debate is the Foreign Sovereign Immunity Act, which is to say, if the injunction violated that law which protects sovereigns.  Pari passu is not an issue for the Supreme Court.  It’s New York law, not federal law.  One must take into account that there is no right to appeal here.  It’s totally voluntary.  They have to say they are ready to listen to arguments.  When it’s an issue of interpreting the law and not constitutional it only does so if there is a conflict between different circuits.  Here it would be very important to get the nod of the U.S. government.  One has to see if the government attorney, the solicitor general, steps in and recommends that the case be taken.

 

 

El Cronista

Insurance against Argentine default falls: betting on a swap for local debt

Trusting that it will continue paying in case of an adverse ruling.  The timing for the holdouts to respond to the offer also helped, as it loosens the agenda a bit

 

Thursday, April 04, 2013

 

The cost of insurance to cover an Argentine default plummeted yesterday on signs that a technical default has been avoided at least until the next coupon payment on a bond in June and because the market expects the government will find an alternative to pay the creditors that opted for restructuring debt in case all legal options close.

 

Thus, the Credit Default Swaps (CDS) at one year fell 24% yesterday to 6339.50 points over the previous trading day while five year contracts dropped 18% from 3271.34 on Tuesday.  The magnitude of the falls doubled the increases registered after the Argentine filing of the payment formula to the holdouts in court.  CDS at one year had risen 9.23% on Monday while coverage at five years had risen 8.7%.

 

“The drop, with low volume, was provoked by the hope that Argentina finds an alternative for the coupons on the bonds that can continue to be paid without the court being able to divert the holdouts’ money,” explained Jorge Piedrahita of Torino Capitals, from New York.

 

Also, in the market they looked favorably on the government making programmed payments on bond coupons for the Par 2038 and Boden 2015 and the order of the Court of Appeals in New York to the holdouts for them to respond to the Argentine government’s proposal.  The investors hope that the terms for the court’s ruling are delayed because the plaintiffs, who are demanding US$1.3 billion in payment, have until April 22 to answer..

 

While it’s likely that the funds will reject the proposal, which offers them 1/6 of the total they are demanding, the deadline of three weeks postpones a definitive decision from the court until the end of April and allows Argentina to continue attending to its obligations.

 

Vice President Amado Boudou said over the weekend that “Argentina will honor under any condition, under any instance, the payments to the holders of debt that entered into the exchange no matter what the result is,” leading many to speculate that the Casa Rosada would be evaluating alternatives for paying the investors.

 

Alberto Bernal, of Bulltick, wrote on the matter: “If the court rules in favor of the holdouts and prohibits Bank of New York from transferring money to the exchange bondholders, Argentina could change jurisdiction of the warrants to Argentine law or even Italian,” said the analyst based in Miami.

 

The rumors around a Plan B, Bernal points out, also include from a reopening of the swap for the holdouts that are not suing Argentina to an offer of buying back the bonds with New York law.