Vultures point toward capturing payments in Europe

Ambito Financiero

Vultures point toward capturing payments in Europe

 

Friday, June 07, 2013

 

A new filing was made yesterday by the vulture funds.  In New York, they asked the Court of Appeals that the blocking and eventual attachment of payments be extended to Europe.  Those payments are also done there through Bank of New York.  It was in response to the request that bondholders made in Belgium to ensure normal payment of Argentine debt (which arose out of the swaps of 2005 and 2010), no matter what the U.S. courts decide.  It is very unlikely that Europe will adopt a Griesa-style posture, which means to affect all intermediaries and put them against Argentina.  There are already precedents against the vultures’ strategy.  Nor is it rational that rulings would jump jurisdictions.  The intention is there.  For that reason caution prevails.

 

 

Ambito Financiero

BCRA, obliged to pay off debt with Bank of France

• It paid half of the US$3 billion that it owed to its last lender

• It was used to apply makeup to the reserves

 

Friday, June 07, 2013

 

If something was lacking to worsen the scarcity of cash that afflicts Argentina these days, there is now a new problem: the last big international lender that the Central Bank is left with, which allowed it to stabilize its stock of reserves at a time of greater exchange rate adversity, seems to have abruptly cut off its cash assistance these months and pushed the organization to pay off its remaining debt.  Only since the end of March until today, and in a year in which the Bank of Basel (BIS) also interrupted its respective line of financing, the official entity paid off half its obligations with the French entity.  It is precisely one of the main reasons why the entity has not been able to stop losing reserves, despite the heavy liquidation of cash from exports (similar to the same period in 2012) providing help in buying currency on the official exchange market.

 

The Central Bank’s exposure with international entities, even when it enjoyed the assistance of the BIS, reached a maximum of US$5.6 billion in 2009.  In the first half of last year, the entity ended up paying off the last US$2 billion in debt it had with the Bank of Basel.  Since then, the Central Bank of France ended up as its only loan provider: some US$3 billion at the start of this year that they started to rapidly reduce two months ago, and which is now at US$1.5 billion.

 

The taking of debt by this avenue is one of the tools that all central banks rely on to attenuate the volatility in its reserves stock.  In the most difficult periods, this makeup that is applied came to represent more than 10% of the entity’s savings.

 

Some consultancies risk a possible explanation to this abrupt cut in financing: the risk that international lenders could be perceiving of an eventual attachment of Argentine assets, in the course of the litigation that the country has with the holdouts in U.S. court, which compromises the capacity of the entity to pay.

 

From the Central Bank they always clarify that these loans can be paid off at times that are seasonably favorable for the entity.  But in the current period, even with the strong liquidation of exports taking place, it doesn’t seem to be the most indicated time to do it: “Objectively it’s not opportune.  You can be sure that it is not being done voluntarily,” an economist said to this newspaper yesterday.  It calls the market’s attention that these sudden payments are being seen on loans that had been contracted in mid-2011 and that have 20 months in effect.  This indeed makes one assume that the pay-down will continue in the coming months; and that the entity, which cannot provide data because of confidentiality of contracts, will see itself forced to cut it down to a minimum.  The phenomenon will leave Marco del Pont’s entity more unprotected, in a year in which it could end up with a stock of less than US$35 billion