That was one of the conclusions of the seminar that was held yesterday in this city to analyze the impact that the rulings of Judge Thomas Griesa produced on the payment of Argentina’s debt and the fear that it would extend to the processes of restructuring of the debt of other countries.

Lead Articles:

 

La Nacion: “Warning that the country would mock an adverse ruling on the debt”  

 

El Cronista: “JP Morgan recommends selling Argentine bonds awaiting holdout ruling”

 

Ambito Financiero: “Report recommends caution over ruling in vulture lawsuit”

 

Clarin: “Cristina rented an English jet to avoid the Tango being attached”

 

La Nacion:  “El Gobierno dijo que contrató un jet privado para evitar un embargo”

 

El Cronista: “El Gobierno confirmó que alquiló un avión inglés por temor a los fondos buitres”

 

La Nacion

Warning that the country would mock an adverse ruling on the debt 

In a debate with operators and experts Griesa’s resolution is put in doubt

 

Tuesday, January 08, 2013

 

By Silvia Pisani 

 

NEW YORK.- The agreement is that next May there could be a verdict about the judicial decision – for now, stayed – which orders Argentina to pay the holders of debt bonds under risk of entering into default if it is not done.  But underneath, and do to “the persistent attitude of the government of Cristina Kirchner of mocking all international rules,” it is “highly likely” that not even this ruling would put an end to the dispute between the government and the creditors that didn’t accept any of the debt swaps offered.

 

That was one of the conclusions of the seminar that was held yesterday in this city to analyze the impact that the rulings of Judge Thomas Griesa produced on the payment of Argentina’s debt and the fear that it would extend to the processes of restructuring of the debt of other countries.

 

Organized by the main association of negotiators of bonds of emerging markets (EMTA), the seminar took place in the central headquarters of Merrill Lynch and transformed into the main forum for addressing the issue.  “This is proof of the interest that this case is generating,” said Henry Weisburg, of the firm of Sherman & Sterling, before the impressive response that the invite had: more than 400 people filled the room.  “The problem with Argentina is that for many that analyze things from the logical side, you always end up being surprised because, for sure, if there is something that (Cristina) Kirchner specializes in it is ignoring international rules,” said Hans Humes, of Greylock Capital Management.

 

Moderated by James Kerr, a first panel put in great doubt that the offer to reopen the debt swap would have an impact on the court’s mood.  “It’s something that seems more like a narrative than something with legal content.  It seems to me that the plaintiffs will reject it and the judges will ignore it,” Weisburg predicted. 

 

The consensus expectation is that it is unlikely the court that must review Griesa’s ruling will accede to Argentina’s request for a new hearing with all 13 members.  The same doubt exists over the possibility that, in that case, the Supreme Court would take the case.  The agreement was that, should the appellate court ruling be adverse, the government “will do everything possible” to “mock the decision and delay its compliance as much as possible” which includes trying to change jurisdiction for the payment to creditors that did accept the swaps to, as such, avoid the reach of American justice.

 

The chance of that hypothetical alternative was nuanced, however, by Sebastián Vargas, of Barclays. "To rehearse a dash to changing jurisdictions when an American court goes against you is not, I believe, going to be something simple,” he said.

 

The seminar was also the occasion for the bondholders that did accept swapping their papers with a haircut to reiterate their position as “victims” of the whole process.  “We don’t want the court to divert our payments to put them in the hands” of the so-called “vulture funds,” said attorney Sean O'Shea, their legal representative.

 

Consulted by LA NACION, Argentine officials that follow the process agreed that the public statements and the open interest for the case favors the expectation that there will be a moderation of Griesa’s initial decision, that to pay the so-called holdouts allows the chance of putting his hands on the money that is sent to the United States to pay other creditors.

 

Strong complaint from the Italians

 

The Italian retail bondholders that remain in default asked the U.S. court to not review the sentence that ordered Argentina to pay a group of holdouts last October.  In a brief filed as “friends of the court”, the Italian bondholders said that “Argentina is sticking with the same strategy of the last decade of eluding its creditors and justice.”

 

 

El Cronista

JP Morgan recommends selling Argentine bonds awaiting holdout ruling

The investment bank decided to downgrade sovereign bonds with the underweight label until the return they offer pays for the risk, while awaiting the ruling from the U.S. courts and despite the context of global rates around zero

 

Tuesday, January 08, 2013

 

The prices of Argentine sovereign warrants have been recovering after the stay of the ruling of Judge Thomas Griesa until the Court of Appeals in New York decides on the litigation between the country and the holdouts, on February 27.

 

But the investment bank JP Morgan says that those price increases are precisely the reason to unload the bonds, according to its latest research report on emerging markets in Latin America.

 

“The valuations of the bonds moves us to change Argentine exposure in our model portfolio to under-weight from market-weight,” the report says.

 

“At current price levels, the risk-return profile looks skewed negatively, which we believe justifies the move toward underweight in our model portfolio,” they explain. 

 

Now the entity will have to rebalance its model EMBIG portfolio with other sovereign or quasi-sovereign bonds “with better outlooks of adjustment of the spreads” to accommodate the changes.

 

“We recognize the risk of being underweight in a context of global rate policies of 0%, while a more prolonged litigation could provoke a demand for high beta-based assets in investments that adopt the criteria of ‘no bad news is good news’”, it adds.

 

The break-even to maintain Argentine bonds at underweight in the portfolio for six months is 45 basis points versus the JP Morgan index of Argentina.  That means that to overcome the negative drag of being more than six months underweight.  “Due to the potential volatility of the spread, this seems a just price to pay” the report says. 

 

In the bank they warn that a reduction of the risk of technical default is possible but they are not sufficiently convinced that more favorable results for Argentina could materialize.

 

Also BofA

 

Bank of America Merril Lynch also issued a report where it is cautious in the recommendations on Argentine warrants.

 

“We remain market weight in Argentine debt and we maintain a prudent outlook while we await oral arguments on February 27,” said its latest global research report.

 

The entity holds in its portfolio the Boden 2015 and Global 2017.  In turn, it estimates that the GDP coupons “are expensive compared to the lows of June 2012, considering that they don’t expect dividends in 2013 and the legal risks that arise from the pari passu litigation.”

 

 

Ambito Financiero

recommends caution over ruling in vulture lawsuit

Paper from Citi economists with scenarios that the country faces

 

Tuesday, January 08, 2013

 

While the market is showing optimism on the country’s fate in the lawsuit over the default in New York, attorneys and even market analysts are beginning to detach from this positive climate.  For example, yesterday a report came out from Citi entitled “Argentina, AC/DC, are we on the highway to hell?”  Using the theme of the rock band AC/DC and the initials of the Appeals Court (AC) and the District Court (DC), the report signed by economists Jeffrey Williams and Guillermo Mondino warns that “the chances of a technical default still remain high” and even recommends acquiring two-year contracts of insurance against default.

 

Since November 28, when the Court of Appeals of New York stayed the ruling from Griesa that was bringing the country to a technical default, Argentine paper started its ascent.  Moments of tension were in the past.  On October 26, before the decision of the Court of Appeals backing “pari passu” (where the vulture funds among others collect along with those that entered the swap), the curve of insurance against default reflected a “low” probability, of 43% for 2017.  That probability hit 90% after Griesa’s ruling on November 21, which ordered the country to make guarantee deposits and pay 100% of the debt plus interest to the creditors.  Now the chances of a default is approximately 55%.  “If we assume that the fundamental risks at the margin of the legal questions has not changed too much since October 26, the increase in the likelihood of a technical default related to the legal risks is only 12% approximately,” says the Citi report.  The bonds under local legislation are currently as levels above those from around the ruling of October 26.

 

Below are the highlights of the report in which it reviews the legal scenarios that the country faces:

 

Griesa ordered that the payment to the vulture funds be made for 100% and the interest to the moment that Argentina pay any service on the papers coming out of the debt swaps.  There has been a certain hope and discussion among the participants in the market that the Court of Appeals could alter the payment formula in such a way as to impose on the holdouts terms similar to those offered in the debt exchanges of 2005 and 2010.  No court has been sympathetic to this view and that would mean a “cram down” imposed on the holdouts.  There is a clear possibility that the formula would be modified but we don’t believe that it will be sufficient to make it attractive for Argentina.  One possibility is that the formula only would include the principal of the debt, plus interest.  And that leaves aside the interest on interest.  That would reduce the claim to US$1 billion, from US$1.45 billion.  Another possibility is that the holdouts only receive the same percentage of the total principal and interest owed over the life of the bonds.  We don’t see Argentina reaching an agreement with the holdouts unless the formula is modified drastically.

 

We believe that the greater chance of success for Argentina lies in the limit that third parties reach in the ruling.  Griesa was broad in that direction and included the trustees, depositaries, clearing agencies and attorneys for Argentina.  The Court of Appeals could find that only the parties with direct relation to Argentina are subject to the inhibition.  If that occurs, it would include Bank of New York and the depositary CEDE & Co.

 

A group representing holders of the GDP coupon bonds argue that it’s not debt but a financial derivative.  The payments that are made are not principal and interest.  The issue is not clear.

 

(See attached file for full Citibank report, in English)

 

 

Clarin

Cristina rented an English jet to avoid the Tango being attached

It will be used for the tour in Asia.  Parrilli admitted that it was contracted without a bidding and will cost almost US$900,000

 

Tuesday, January 08, 2013

 

By Nicolás Pizzi

 

The government will not use Tango 01 for the Asiatic tour of Cristina Kirchner for fear of an attachment from the vulture funds.  In its place, it rented, without a bidding, a jet from an English company, right in the middle of a new verbal escalation with the British government over the sovereignty of the Malvinas.  Through a statement, the general secretary of the Presidency, Oscar Parrilli, confirmed yesterday the information published by Clarin on Saturday.  Notably, the official decided to respond to the London newspaper, The Sun, whose report echoed the article of this newspaper the following day.

 

The president will travel on a Global Express 7000, a luxury aircraft from the company Chapman Freeborn, dedicated to cargo transport and private flights.  After meeting with Cristina in Olivos, Parrilli reported yesterday that the trip will start this week in Cuba (destination to confirm), the Arab Emirates, Indonesia and Vietnam, and will cost US$880,000.

 

He didn’t show receipts nor documents that backed it up.  And he limited himself to highlighting that the value of the English aircraft is “20% superior to the operation of the T-01”, which would cost US$730,000.

 

Beyond the cost, the government confirmed that there was no bidding for the “scarce available time.”  Parrilli said that six companies budgeted for the itinerary and the English company was selected “for being more convenient from the operational, economic and financial point of view.”

 

The tipping of the scale, as Clarin could find out, was when the English accepted a partial payment despite these trips being paid in advance.  Other information that was not included in the statement was that the selected budget was not the most economical.

 

To justify the contracting of the Global Express, a stand-out in the market for its flight autonomy (it can go from New York to Tokyo non-stop), the government mentioned reports from local organizations that warned of a possible attachment abroad by pressure from the vulture funds.  The decision shows that the President took note of the scandal of the Frigate Libertad and didn’t want to risk repeating it.

 

The recent clashes between Prime Minister David Cameron and Cristina Kirchner over the sovereignty of the Malvinas fell to the margin when renting the plane.  Parrilli didn’t explain the reasons for opting for a British provider.  He said that the company Chapman Freeborn, which just opened an office in Buenos Aires, had already been contracted in 2010 and 2011 for presidential trips to Guyana, Madrid, Paris, Barcelona and Cannes.  But the selection of a foreign company has another additional cost: it obliges the government to transfer dollars outside of the countries (local companies collect in pesos).

 

The government decided to respond this time to the sensationalist newspaper The Sun, which had published an ad last week in the Buenos Aires Herald in response to an open letter from Cristina in the newspaper, The Guardian.

 

On Sunday, that London newspaper reproduced, almost verbatim, the information revealed on Saturday by Clarin about the plane and took advantage to question the millionaire wealth of Cristina Kirchner.

 

 

 

La Nacion

The government said that it contracted a private jet to avoid an attachment  

It will pay US$ 880,000 to a British company for Cristina to visit Cuba, the Emirates, Indonesia and Vietnam; fear of a complaint from the bondholders against Tango 01

 

Tuesday, January 08, 2013

 

The government reported finally yesterday that for fear of suffering attachments on the part of the vulture funds, President Cristina Kirchner will avoid using the Tango 01 for the tour that will begin on Thursday to Cuba or Venezuela, the United Arab Emirates, Indonesia and Vietnam.

 

The secretary general of the Presidency, Oscar Parrilli, was obligated to give the information after the sensationalist English newspaper, The Sun, reported that the Casa Rosada had contracted in an “ultrasecret” manner and for a million dollars (or 622,000 pounds) an aviation company from the United Kingdom.  The issue had been published previously by the morning daily, Clarin.  

 

Around rumors of prices that were paid for the flight, Parrilli argued that the English aviation company Chapman Freeborn would be paid US$880,000 for the whole trip and argued that the direct contract with the private flight company was made for fear of suffering attachments.

 

After the detention in Ghana of the Frigate Libertad, which will arrive tomorrow in Mar del Plata, the Casa Rosada sought to avoid news incidents with the vulture funds.  In fact, a few days after the teaching vessel was detained in the port of Tema, the government reported that the presidential plane had suffered an attachment in March and May of 2007, in the United States, which had never been officially made public.

 

According to the statement, with the fear of action from the bondholders, on December 26 the Foreign Ministry recommended avoiding the use of Tango 01 for “reasons of the aggressive posture of the vulture funds with the Argentine Nation” and the legal staff led by Susana Ruiz Cerutti found that it was “highly likely there would be attempts at complaints, injunctions or execution” on the aircraft.

 

The same recommendation came from the Treasury solicitor, Angelina Abbona, who was misnamed in the official statement from Parrilli as the Attorney General of the Nation, a spot occupied by Alejandra Gils Carbó.

 

"The presidential jet is not attachable.  The precaution is not bad to avoid preventive attachments, but, if they come, after a period they are reversed, as happened with the Frigate Libertad,” said attorney Eugenio Bruno, expert in sovereign debt issues.

 

Justifications

 

Parrilli justified that in the short time available before the trip there was the contracting without public bidding of Chapman and he said that there had been a round of pricing with another seven companies.  The choosing of the English company was decided for it being “the most convenient from the operational, economic and financial point of view,” he said.  Anyway, the government didn’t show any of the offers nor the budgets, nor reported how much had been offered by the rest of the companies.

 

The official statement begins with a long criticism of the newspaper The Sun, which published the news.  “Mr. Rupert Murdoch, head of the newspaper, was condemned for illegal wiretapping and publishing false news, knowing they were false, related to actors, personalities and politicians in the United Kingdom, openly benefitting the electoral campaign of Prime Minister David Cameron, to the point that cabinet ministers had to resign from the scandal and complicity with Mr. Rupert Murdoch,” said Parrilli in the first point of the press release.

 

The most curious thing is that the general secretary of the Presidency ended up confirming the information in that newspaper.  He only corrected the amount of a million dollars to US$880,000, which is to say, US$120,000 less than the British paper reported.  

 

According to the government, the budget for Tango 01, between fuel costs, airport fees, ramp rights, handling services, on-board catering, and costs for the crew would come to US$730,000.

 

The plane that Cristina Kirchner will use for her tour is a Global Bombardier Express, the same plane that was already used on other trips to Guyana, Madrid, Paris, Barcelona and Cannes.

 

 

El Cronista

The government confirms that it rented an English jet for fear of the vulture funds

In a statement, the secretary general of the Presidency tried to deny the criticisms of the British newspaper The Sun.  He said the cost would be 20% more than what would be spent with the official plane

 

Tuesday, January 08, 2013

 

The government confirmed yesterday that it rented for the presidential tour of Asia a British plane for fear of an attachment of Tango 01 by the vulture funds.  Through a statement, the secretary general of the presidency, Oscar Parrilli, sought to deny the English newspaper The Sun, in full political clash with English Prime Minister David Cameron over the sovereignty of the Malvinas Islands, had criticized the operation for its “ultrasecret” character.  But it ended up admitting that the government will pay US$880,000 to a company from that country.  While not showing documentation, he said that the trip by Cristina Kirchner to Cuba, the United Arab Emirates, Indonesia and Vietnam will cost “only 20% more than what would be paid using the official aircraft.”    The government is seeking to avoid that Tango 01 go through the same as the Frigate Libertad in the port in Ghana.  

 

The information had been revealed by the newspaper Clarin but the Casa Rosada tried to deny it when it arrived into the English media.  There are only small difference between the original reporting and the official admission, especially in the cost of rental for the official trip by Cristina, which had come out first as costing a million dollars.  In England they accused that it was a secret contract.  To get out in front of the accusations, Parrilli reported its content but avoided publishing it.

 

What was confirmed is that the government contracted the English company Chapman Freeborn, to which it had appealed in 2010 and 2011.  The text from Parrilli also revealed that Cuba has been included in the trip, where Venezuelan President Hugo Chavez remains hospitalized in serious condition.  Parrilli began his supposed denial charging against the magnate Rupert Murdoch, owner of various media included the Sun, for having been “condemned for illegal wiretapping and publishing false news knowing they were false, related to actors, personalities and politicians in the United Kingdom.”

 

Them, the government didn’t avoid stating the reason for renting the private jet.  “The Legal Counsel for the Foreign Ministry counseled this general secretariat to not use the Presidential jet T-01, for said trip, for reasons of the aggressive posture of the vulture funds with the Argentine Nation,” Parrilli said.  The last word, according to the statement, was with the head of the Casa Militar, Agustín Rodríguez.

 

The Presidential secretary also justified the cost of the rental, which he tried to minimize as “around 20% more than the operation of T-01.”  According to the official estimate, the same tour on the presidential Boeing 757 would come to US$730,000, including fuel and crew costs.

 

Finally, with the excuse of the “scarce time available”, Parrilli argued that “it was decided to hold a round of pricing with companies offering this service.”  Of the seven companies invited, six “presented offers, with very similar prices and characteristics.”  Despite the supposed parity of the budgets, in official quarters they admit that the English company was not the most economical.  In the Rosada also they complained yesterday of the time chosen to contract an English company in the middle of a full court diplomatic press over the Malvinas.