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Mittwoch, 9. Oktober 2013

El Cronista: “With some doubts, Wall Street banks believe that Argentina will reach the end of 2014 without default” Ambito Financiero: “U.S. Supreme Court rejects taking case against vultures” Clarin: “U.S. Supreme Court denies taking Argentine case” by Ana Baron (Samp quoted) Clarin: “Economy minimizes relevance of the rejection and will file another appeal” Clarin: “A strong setback for Argentina, according to opinion of experts” Clarin: “Foreign debt is alive and kicking”

El Cronista: “With some doubts, Wall Street banks believe that Argentina will reach the end of 2014 without default”  
Ambito Financiero: “U.S. Supreme Court rejects taking case against vultures”
Clarin: “U.S. Supreme Court denies taking Argentine case” by Ana Baron (Samp quoted)
Clarin: “Economy minimizes relevance of the rejection and will file another appeal”  
Clarin: “A strong setback for Argentina, according to opinion of experts”  
Clarin: “Foreign debt is alive and kicking”
El Cronista
With some doubts, Wall Street banks believe that Argentina will reach the end of 2014 without default
Tuesday, October 8, 2013
"The Supreme Court of the United States rejects the Argentine appeal of the pari passu case, but this does not mean that it is ejecting the case,” was the title yesterday of an analysis by JP Morgan around the decision taken by the Supreme Court not to take the petition for review which the country filed on June 23.
It is an appeal with respect to the ruling of October 26, 2012, whereby the Appeals court upheld the ruling of Judge Griesa which ordered Argentina to pay its creditors.
In the midst of a rarified climate after the announcements of the state of health of President Cristina Fernández de Kirchner, the consensus on Wall Street is that the Court's decision was expected and that it will not generate substantial changes in the future outlooks for analysis for Argentina. "The Court's decision is not surprising. The question is how long the legal process may be delayed," said Diego Ferro, in statements to El Cronista.
Immediately, attention is focusing on the subsequent appeal to be submitted by the country before the Court in relation to the final decision that the Appeals court issued on August 23, which upheld the amounts and payment mechanisms, which the highest court still has not received.
"We did not expect this first appeal to go anywhere. It is the second appeal that matters. The denial of the first appeal does not necessarily predict how the Court will respond to the second, because in the brief Argentina invited the Court to wait [to rule on] the next appeal,” said Casey Reckman, an analyst from Credit Suisse for Argentina, in a dialogue with El Cronista.
So Wall Street is focusing on how long the legal process can go on, and Argentina’s chances that it could fall into a technical default. It should be noted that the Court did not communicate whether it was rejecting the case for procedural issues (the appeal was not on the final ruling of the appeals court)  or a lack of interest in the underlying issue.
In this context, JP Morgan raises two possible scenarios and is playing by the more positive on: on the one hand, that the dispute will extend over time, taking into account the decision made yesterday by the Court was over procedural issues. This scenario implies that the stay on the ruling will not be lifted and Argentina will file the second appeal to the Supreme Court after the en banc (the petition for review which the country filed before all the judges of the Appeals Court and not only the three that ruled) is rejected by the Court of Appeals. Immediately thereafter, the highest court will request the opinion of the Solicitor General, who might recommend to the Court that it take the case.
The second scenario posed by the bank, which is more pessimistic, in which the dispute could reach a "tragic" end, is whether the refusal of the Court reflects an underlying consideration. In this case, the risk would be that the Court of Appeals would remove the stay, that Argentina decides to defy the payment order to favor bondholders and therefore enter into technical default on its next debt payment.
Meanwhile, legal experts consulted by El Cronista argued that the stay will remain in effect until the second appeal concludes its legal course.
However, for Marcelo Etchebarne, partner at the firm Cabanellas, Etchebarne, Kelly & Dell'Oro Maini, under the risk  that in December, when Argentina sends debt maturity payments to BoNY (Bank of New York Mellon), the bank will consult with the Court of Appeals on whether the stay is still in force.
Ambito Financiero
U.S. Supreme Court rejects taking case against vultures
Tuesday, October 8, 2013
by: Carlos Burgueño
To buy time until the end of the first half of 2014 and to wait for help, for now a distant thought, from the administration of Barack Obama. After yesterday’s decision from the U.S. Supreme Court, this seems to be the strategy of the government in the lawsuit from the vulture funds; which entered into its final stretch yesterday. The decision by the highest U.S. court yesterday ended up being worse than expected, with the court opening denying Argentina’s petition to review the adverse ruling of October of last year. After accepting a 50 cases to take up during the judicial year in the United States, the nine judges who make up the highest court announced that Argentina’s petition was "denied" including the technical foundations of that decision. This fact turned out worse than expected. According to analysts, if the Court had simply not added Argentina to the list (as happened last week) it would have shown some willingness to continue analyzing a future acceptance. However, the fact of having made explicit why the Court was refusing the order, it suggests that in future appeals, the decision will be the same.
While the resolution upholds the decision of the Court of Appeals of New York, which orders the country to pay about US$1.33 billion to the vulture funds NML Elliot of Paul Singer, Aurelius and Olifant, in addition to some 13 individuals, it theoretically gives the country another life. This is because the Court still did not issue a final ruling since administratively to open an instance of appeal, one must wait for it to close in order to advance to a final resolution.  The "en banc" filing by the Argentina before the Court of Appeals is still not closed, an appeal by which all the judges (13 judges) of that court must give their verdict to uphold or reject the ruling from last August.  It is ruled out that this will happen in the next few weeks and then, administratively, the Argentine government will have other 90 days to make a last appeal to the Supreme Court to take or reject the case. The high Court yesterday already clarified that it will not accept taking it, but to make this happen definitively and without the possibility of new appeals, it will have to take at least until 2014. Then the country will have complied with the payment of about US$235 million in interest due in December of this year (US$ 120 million from the Discount from the 2005 swap;  US$73 million from the Discount of the 2010 swap, and another US$42 million from the Global 2017). With this a technical default, at least for this year, will have been avoided, one resulting from the impossibility of paying debt under the jurisdiction of New York, money that would end up being attached if the ruling of Judge Thomas Griesa remains final.  
The Court's decision does not alter either the status of the "stay", which Argentina can continue to pay interest to bondholders who accepted the 2005 and 2010 swaps. However, it binds this status to the evolution of the decision of the Court of Appeals of New York on the "en banc". If the legal timetables are met, when this second instance is decided, Argentina will have 90 days to appeal to the Supreme Court (timing that the country will use to the maximum). Then the litigants (vulture funds) will have another 10 days to present their arguments and finally the Supreme Court would decide if it definitively takes or rejects the case.  
At that point, and during the period in which Argentina is preparing the appeal, the maximum option for the Court to agree to take the case is that the government of Barack Obama openly asks the Court to take the case as a matter of national political, economic or financial interest so that the issue between the country and the vulture funds must be resolved. At that point, the "Solicitor General" (the nexus between the Executive Branch and e U.S. Judiciary), should exert the role of negotiator between the two powers. Another alternative is to ask that Obama personally ask one of the judges of the Court to take the case as a personal interest. The closest judges to the American President are Sonia Sotomayor and Elena Kagan (named under his administration) and the historical Democrat Ruth Bader Ginsburg.
U.S. Supreme Court denies taking Argentine case
Rejects appeal from the government on two rulings that order it to pay US$1.33 billion in case to a group of creditors.  They are the ones that didn’t enter the debt swaps in 2005 and 2010.  
Tuesday, October 8, 2013
By Ana Baron
The U.S. Supreme Court yesterday rejected the appeal filed by Argentina in the case that pits it against the vulture funds. This means that the government lost another battle, although it still has not lost the war. The theatre of operations, however, is increasingly adverse to Argentina.
The Supreme Court did not explain why it rejected the Argentine appeal. But it’s clear that it had been difficult for the judges to evaluate a case in which the file is not complete because it is expected that Argentina will make a second appeal in a couple of months.
Anyway the Court sent a series of signals that are not positive for Argentina. First, instead of postponing its decision on the first appeal by awaiting the second - as it is often done in this type of situation – it decided to flatly reject the first one.
The Supreme Court also opted not to ask for the opinion of the U.S. government as it did in other cases which it accepted yesterday.
Another important aspect of the announcement yesterday is that the Court specified that one of its members, Justice Sonia Sotomayor, the only Hispanic on the court, did not participate in the considerations or the decision announced yesterday. It most likely that Sotomayor has recused herself because when she was a member of the Court of Appeals she had to try cases relating to Argentina's debt. And if she did that yesterday she will probably also do so when Argentina files the second appeal.
Richard Samp of the Washington Legal Foundation, explained to Clarin that "this is a problem" for Argentina.  Four judges are needed for the Supreme Court to accept a case, according to Samp. If Sotomayor is not involved, there will be eight instead of nine judges, i.e. there will be a smaller pool of votes that might vote in favor of Argentina. In addition, in case the Court takes the case, at the time of the ruling it could be a tie between those favorable to Argentina and those favorable to the holdouts. And if that happens, by law the holdouts win.
Rejecting the appeal yesterday, the Supreme Court upheld the interpretation made by Judge Thomas Griesa of pari passu which was at the center of the decision of October 26.  Samp said no, that the Court can reverse that clause if it accepts the second appeal.
Anyway, faced with a new defeat and without new legal ammunition, the government's strategy is to buy time.
What was at stake in the appeal rejected yesterday is a ruling from October 26, 2012 in which the Court of Appeals, upheld Griesa’s interpretation of pari passu by determining that Argentina must pay the vulture funds 100% of what they are owed, at the same time that the restructured bondholders are paid. What is now being considered is the ruling of August 23, in which the Appeals court upheld the formula of payment and the sanctions against banks that help Argentina pay bondholders without paying the vulture funds at the same time. Like with the October 26 ruling, Argentina requested that the Court of Appeals review the ruling of August 23 en banc, i.e. before the plenary of this Court which is composed of 13 judges.
As all the experts take for granted that this petition will be rejected, Argentina can then appeal to the Supreme Court. But at the end of the process, if everything continues as it has until now, Argentina will have bought more than a year.
According to some experts, Argentina wants to get to December 2014, the month in which the preferred creditor clause, which obliges the government to treat all creditors equally, expires. "But this clause exempts the cases of judicial orders, i.e. If the Supreme Court requires Argentina to pay 100% to the holdouts, the government can do it without the bondholders who entered in the exchange asking for the same conditions. At this level, the problem is the lock law,” explained Eugenio Bruno of the Garrido firm to Clarin.
Economy minimizes relevance of the rejection and will file another appeal
Tuesday, October 8, 2013
by Tomás Canosa
The announcement from the U.S. Supreme Court didn’t surprise the economic team, since the government said there were still recourses for making a new appeal.  They even point out that the country could continue paying foreign currency debt and denied there was a risk that the country would enter into technical default in the short term.
“Argentina will continue exercising its defense in the framework of the legal process with all available legal recourses,” said Finance Secretary Adrián Cosentino, through a statement yesterday.  
The case against the vulture funds has two parts: the Supreme Court yesterday ruled on one half, but the other one still hasn’t reached the highest court in the United States because it will have to wait for the response of the Court of Appeals.  The government filed a petition for the case to now be reviewed by a wider court, of 12 members because previously only a panel of three had studied it (a process known as en banc).
After this response, and in case Argentina’s petition is rejected, the government would be in a condition to appeal before the Supreme Court on this second half of the case.
The main question that exists in the local financial market is if the government will continue to count on the stay remaining in force, which allows the country to continue making payments in foreign currency until the Supreme Court rules.
Two qualified sources from the Economy Ministry said that the “stay” remains in force until the highest court rules on the complete ruling and as such they assure that this protection will continue in 2014. 
The government already made two payments corresponding to 85% of the maturities in foreign currency for the year and for the coming months payments are left for the Bonar X and the Discount.  The opinions of economists and attorneys from the private sector about the extension or not of the stay are not homogenous and some are putting forth doubts about if it will effectively remain in force or not.
Lorenzino was with Axel Kicillof yesterday at noon at the Government House and in the afternoon he had meetings in a good mood with his aides.  The head of the Palacio de Hacienda has scheduled to travel to Washington tonight together with other officials of the Economy Ministry to participated in the assembly of the IMF and World Bank.  Sources close to the official said that there were technical conversations with the Fund over the vulture funds case.  The entity issued a document on May 22 in favor of Argentina’s position, concerned over the impact that will come on the world economic scene in case of a ruling against the country.  The Fund even had scheduled to filed a brief before the Supreme Court but ended up changing its opinion and didn’t put forth its point of view on the case and its possible consequences.
A strong setback for Argentina, according to opinion of experts
Tuesday, October 8, 2013
by Tomás Canosa
Attorneys and economists who follow the case closely made different interpretations about the ruling of the Supreme Court that was known about yesterday morning.  All agreed that the news was negative for Argentina, but different about technical aspects.  
JP Morgan sent out a report to clients at noon to notify them of the ruling and in the document put together by economist Vladimir Werning the institution estimated that there are two scenarios  The most optimistic, according to JP Morgan, was that the Supreme Court rejected the case because it plans to have the case in its hands and then when it has it all together it will ask for the U.S. government’s opinion.  Even in this scenario, the country will continue to count on the stay which allows it to make debt payments.  The other scenario, a more pessimistic one, contemplates that the Supreme Court already “substantially” ruled on the case and the Court of Appeals will decide to lift the stay, leaving the country on the verge of technical default.  JP Morgan clarified that the more optimistic one is more viable.
Former Finance Secretary Miguel Kiguel also avoided being too pessimistic.  “(The ruling) is a first instance that basically leaves the door open for another appeal, by which the problem of uncertainty will continue until autumn of next year,” he said.  
Eugenio Bruno, attorney for the Garrido firm, said that the key at this moment is in seeing if the “stay” remains in force or not.  He said that until now he doesn’t have a set opinion about the issue and estimated that the U.S. courts will have to make a clarification in the coming days.  
Marcelo Etchebarne, attorney and expert in debt restructurings, estimated that the stay should not be lifted . “The only relevant thing is what the attorneys for the Bank of New York (entity that channels Argentina’s debt payments) think,” the expert said.
Foreign debt is alive and kicking
Tuesday, October 8, 2013
by Alcadio Oña
Just three weeks after taking office, at the end of December 2015, the new government will have to deal with the payment of US$9.8 billion, or bank the political cost of skating on it. It is because that is when the maturity expires on the bond that the National Treasury placed at the Central Bank in 2005, so that Néstor Kirchner could repay all the debt with the IMF in one fell swoop.
A few days earlier, the future President may have to take charge of a bill of almost US$5 billion, if the 2014 economy grows by the 6.2% provided for in the National Budget. This time, it would cover private creditors obligations tied to the evolution of GDP, which is triggered when the gross domestic product rises more than 3.22%.
In the case of the Central Bank, the alternative will consist of extending the maturity of a bond that the entity carries on its back and is which pays zero interest. It will be inevitable, as dollars won’t exist to face the disbursement.
There will be no escape, on the other hand, from the so-called GDP coupon, although the economic growth of 6.2% the budget speaks of is difficult to achieve. When the time comes, it will be proven that this is another piece of the bill that the Senate will turn into law this week.
It remains to be seen, also, how the vulture funds lawsuit enters into the Kirchner legacy. If the U.S. Supreme Court upholds that its final decision is to not take up the matter, the adverse rulings for Argentina in lower courts, four so far, will end up being final and a time bomb will be triggered that Cristina Kirchner very likely will not be able to disarm.
This process reveals that the repeated efforts by Minister Hernán Lorenzino deployed in the United States were completely ineffective, as well as the strategy of the expensive law firm hired by the government, as well as that of the President herself, who always put her seal on the negotiations and had the last word.
Amid so many tremors, Cristina Kirchner said that she was not thinking of paying a single dollar to the vulture funds, i.e. that her plan contemplates ignoring any unfavorable ruling from the U.S. courts. Thus, the direct and collateral effects of the outcome are unpredictable. Would they fall to the next President, just as the US$9 billion in default with the Paris Club and the lawsuits against the country in the ICSID, the tribunal of the World Bank?
From one side to the other, the picture calls into question the lofty discourse on debt reduction. And official figures as well.
The Kirchner era started with a debt of US $150 billion, and in the last yen years, US$173.7 billion has been paid in, and despite everything, late last year the data showed that outstanding liabilities added up to $220 billion. The result: the country owes more than it did at the beginning of the Won Decade.
There are many other narratives accommodated to whatever factor, without realizing that in the end they are expensive.  An example is that the Argentine economy is not only growing at Chinese rates, but is growing more than China: 8.3% against 7.5% in the second quarter. All very exciting, except for one detail: that is according to the controversial INDEC statistics.
And precisely the detail encourages a move from the Renewal Front of Sergio Massa, which can get noisy and bring trouble to the government. There is talk of denouncing the INDEC leadership in court and Guillermo Moreno himself, de facto administrator of the body, for breach of the duties of a public servant.
The point is that Massa’s economists warn that the official numbers are inflated, an interpretation shared by all private consulting firms. And moreover, because of the 2013 outline, next year Argentina must pay some US$4 billion in debt tied to GDP.
It doesn’t seem to be a small thing that the complaint comes out from the ranks of the candidate who, according to the latest polls, has a 14-point advantage to the pro-government Martín Insaurralde in the crucial province of Buenos Aires. That only increases the voltage. This scenario and the one which is projected across the rest of the national territory, shows scarce, definitively null political gain that the maneuver is giving to Kirchnerism.  In the end, voters believe in what they see every day and not in the narratives, and what they perceive is an economy far from the famous Chinese rates of growth or creating jobs like before.
It hardly goes without saying that the same goes for annual inflation of 10.5% that has the INDEC and, often, with the statistics on poverty and indigence falsified by this price index.
Although it has been known for a while by several experts, if you will, the novelty is the alleged manipulation of GDP. Until the INDEC stops skating on its calculation, when at the same time it says that in the same period the monthly estimator of economic activity (EMAE) scored an increase of 7.1%, more than one point below the 8.3% attributed to the gross product.
Growth at Chinese rates also doesn’t jibe with another fact also from an official source: it points out that electricity consumption between January and July alone rose 0.8%.  That is impossible in one place something like this happens and in another a totally different thing does.
But it may happen that the INDEC is derailing its own designs. It is working in a change of the base year upon which it calculates GDP and that perhaps will lower the numbers for 2013 and dispense with the payment of US $4 billion in 2014.
It would be a helpful reform in the point of the debt, but the growth which the government says is there, is what it says is there. And then there is the risk of litigation with the current bondholders, as well as the one filed by the vulture funds.
According to private estimates, Argentina has already paid about US$11 billion in bonds tied to GDP. And according to the terms of the exchanges of 2005 and 2010, there is other 18 billion ahead: US$29 billion in total. Nothing like the package in the official statistics on Argentina's debt.
Thus, those who do the full accounting come to the conclusion that there is no 75% haircut like Kirchnerism touts, but one of 15%.  A famous general said that the only truth is reality, although the phrase didn't belong him entirely. In any case, it is seen that it is possible to crash into reality while attempting to deny it

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