Lead Articles:
La Nacion: “More arguments for the country against the holdouts”
Clarin: “Vulture funds: Argentina’s allies will now have a voice”
Ambito Financiero: “Alternatives for paying bondholders outside of NY”
El Cronista: “Lorenzino travels to G-20 meeting to seek allies against the vulture funds”
El Cronista: “Griesa goes for Banco Nacion’s accounts”
La Nacion
More arguments from the country against the holdouts
New York court will give more time to the government and its allies to speak against the ruling of Judge Griesa; US$1.3 billion is in play
Tuesday, February 12, 2013
By Silvia Pisani | LA NACION
WASHINGTON.- When there are only two weeks left before the public and final hearing with the so-called “vulture funds” over the payment of US$1.33 billion, the preview battle over “speaking time” for each of the parties seems to be opting in favor of Argentina.
According to what was indicated to LA NACION last night, the judges seem to have given their ears to the generalized protest and will be ready to concede some more minutes to the scarce quarter hour of speaking that they initially granted for each party.
As such, the distribution of time will give more chances for the argument line that rejects the payment formula – overall and how it affects intermediary institutions – which the lower court judge Thomas Griesa set with the ruling – now stayed – from last November.
Added to the 15 minutes of speaking that is already granted to the Argentine defense will be another 14, distributed in equal parts between the group of bondholders that accepted the debt swap and the Bank of New York, the entity which acts as payment agent.
For the plaintiffs, as such, the initial time of 15 minutes will be extended by another five.
In recent days, the Court of Appeals received protests from the so-called “affected third parties” for not having the chance to speak. By confirming this distribution of time, their arguments will be, from different paths, headed to the same objective of trying to put into doubt the viability of Greisa’s ruling.
"This is something that makes us content,” said sources close to the Argentine side to LA NACION.
Yet possibly not so much for the plaintiffs. Both NML Capital Management and Aurelius criticized the abundance of speaking in favor of the goal of rejecting their pursuit of Argentina.
"Since the ruling of October 26, 11 parties have come forward in Argentina’s favor with 14 briefs totaling 392 pages,” both funds said days ago in a joint brief.
But if it manages to orient the speaking time in its favor, Argentina has, however, other reasons for concern in the long litigation.
Complaint for Nacion
In recent hours, Judge Griesa insisted in his demand that Banco Nacion reveal the manner by which Argentina manages its funds and assets abroad.
For some time Griesa has been demanding that, but our country’s authorities refused by arguing that they are “impeded by law” in revealing that kind of information.
The rejection is not based – Argentina says – on its own legislation, but on those of the countries where the bank operates its branches.
For the judge, however, Argentina’s position “is not demonstrated” and for that he again demanded that kind of information.
The judge, which officials of Cristina Kirchner’s government refer to as a “serial attacher”, is seeking assets in order to collect on the debt that the speculative funds are claiming.
The clash of arguments and the complaints are part of the court battle with which the holders of debt bonds that didn’t accept the swap of their papers (the so-called holdouts) are demanding total payment. The government rejects that position because – it says – it would set off a cascade of additional lawsuits for more than US$43 billion.
The hearing for the 27th was set by the Court of Appeals in New York as a first step toward deciding what to do with the ruling of Judge Thomas Griesa that ordered payment to the holdouts. Once the arguments are over, the decision could come at any moment.
Clarin
Vulture funds: Argentina’s allies now will have a voice
In the hearing that will be held on the 27th in New York, they were granted 7 minutes
Tuesday, February 12, 2013
By Ana Baron
New York. Correspondent.
In the dispute between Argentina and the vulture funds around who will have more time to speak on their respective positions on February 27 before the Court of Appeals in New York, in the end our country got nine more minutes.
In effect, the court initially had determined that the vulture funds NML and Aurelius would have 15 minutes and Argentina another 15 minutes.
But Argentina’s allies in this case, EGB , the group of holders of exchanged bonds, and the Bank of New York, protested because the court had not given them time.
The court decided then yesterday to increase by five minutes the time for the vulture funds, which is to say now they will have 20 minutes. And while Argentina’s time remains 15 minutes, the court granted Bank of New York and the EGB seven minutes each.
This means that those who say that the court will have to reverse the ruling in which Judge Griesa established that Argentina has to pay the vulture funds 100% of what is owed, at the same time that they pay the holders of restructured bonds, will not have a total of 29 minutes.
That is nine more minutes than the vulture funds. These funds are seeking that the court uphold Griesa’s ruling that favors them.
The EGB have been supporting Argentina’s position because they find that Griesa’s ruling would turn them into hostages in a dispute that doesn’t concern them.
They say that if the ruling is upheld they are running the risk of not getting paid. And that goes against their constitutional rights.
Bank of New York Mellon argues, for its part, that “the passive conduct of something that is not a party in the conflict cannot be turned into active collaboration with the transgressor.”
And as such they cannot be penalized as the Griesa ruling indicates. “The testimony of Bank of New York Mellon will be the most important. Nobody wants to harm the payment chain,” said a Wall Street attorney to Clarin.
Be that as it may, it is also good news for Argentina that star attorney David Boies, who represents EGB, can speak in the hearing.
Boies is known for having represented Democrat Al Gore in the fight that he had with Republican George Bush in the presidential elections of 2000.
Ted Olsen is the attorney who represented Bush at the time. And as a curious bit of information, he will also be in the hearing, this time representing the vulture funds.
Ambito Financiero
Alternatives to pay bondholders outside NY
Tuesday, February 12, 2013
By Eugenio Bruno
The potential claims from defaulted bondholders who are not involved in the lawsuit in New York over the pari passu clause at judge Thomas Griesa’s court, which could come to 12 billion dollars in that jurisdiction, added to over 8 billion in Italy, Germany and Japan, have given rise to a new key aspect in the way the problem is handled, based on the “inability to pay”. This means the inability to meet external obligations, even if willing to do so. In the Argentine case both issues are involved, meaning not only that the government has announced that it has no intention of paying the sentences, but that now it is unable to do so, even if it should want to. This situation is unique among sovereign restructuring and in the context of lawsuits brought by holdout creditors, as in earlier cases, the legal amounts were substantially less in comparison with restructured debt and hence the payment of the sentences did not affect public coffers, except for some specific cases such as Jamaica and the Congo.
The problem, as we have said earlier, is that the argument produced at the New York courts based on the inability to pay, which has been essayed by low-income countries, has not been taken into account so far by the courts here.
In the Argentine case judged by Griesa, this is not the first time that the lack of resources to pay has been posited. In particular, following the 2001 default and until the 2005 swap, they presented arguments based on need in order to avoid executing the sentences passed by Griesa (the first was at the start of 2003) and in order to allow such a swap to take place, based on avoiding an economic crisis if this did not come about. Both Griesa and the Court of Appeals went along with this and allowed the operation to take place. In fact, a ruling at that time passed by this court was based on the need to allow the swap to take place on the basis of political arguments, without reference to either legal clauses or jurisprudence. This was considered a special sentence.
Later, Griesa and the Court again allowed the second swap, turning down attachments and requests to not permit this operation. But so far they have never issued a ruling which expressly takes into account the inability to pay. Nobody knows what could happen at the hearing scheduled for the 27th of this month, nor what the Court’s next ruling might be, although it cannot be ruled out that this aspect may be taken into account in the eventual execution of the sentences. But perhaps 2013 will not be like 2003, 2005 nor 2010 in terms of the position taken by Griesa and the Court to support the country.
It is however clear that one thing concerns claims for only US$1.4 billion and another is potential claims for US$20 billion. Now, if the sentence is favorable to the plaintiffs and requires immediate execution (something which cannot be dismissed), with both appeals pending—en banc and at the Supreme Court—the question which one asks oneself is what will the government do. One option is to pay up. But this goes against their expressed will to pay, and now their ability to pay. Hence, this path, according to the briefs issued by the government, will not be the one taken. So what will happen then? First is the scenario which most concerns the government, but is also one which the holders of the swapped bonds, the Bank of New York, the US and the international markets are trying to avoid. This is the case wherein the government would not pay, and if the ruling stands, the payment of the bonds currently being honored will be at risk, as they will no longer be able to use the New York financial marketplace to pay them (as the payment would be attached and thus these would be defaulted). Thus, the option is to attempt the complex operation to change jurisdiction and payment agent or trust fund, in order to continue making the payments in Europe, or even in Argentina. But this will take time to set up and also demand agreement from 85% of these bondholders (and that there be no less than 65% of adhesion for either series).
Furthermore, there is a question mark hanging over the Bank of New York, specifically, if it will continue to act as trust fund or payment agency in this scenario. Also, this situation implies disobedience towards the U.S. judiciary, which has required the government to comply with the rulings whichever be their result. The payment transaction in Europe implies an open stand-off with the judicial branch. The consequences of this are difficult to predict. But there is one thing which is sure: if the transaction involving payment in either Europe or Argentina has even the slightest point of contact with New York, it will be at risk, as the court in this jurisdiction may clamp down on it. This would make this option much more complicated.
In any case, what is obvious is that the amounts of the claims made by the holdouts threaten their ability to collect, and would eventually push Argentina to the edge of default. Faced with this, the Government has said that its payment proposal is based on the swap conditions. But a forced swap does not seem to be acceptable for the New York justice system. We believe that the strongest line of defense is the so-called trust fund wherein payments are made in Argentina and thus outside any US jurisdiction. But so far, the justice system in that district has made no reference to this alternative.
Hence, whatever the scenario, perhaps the current solution to the problem of the debt may not be at hand for either of the parties, and thus the possibility of avoiding a default (which would damage everybody’s interests) is completely subordinate to the result of the ruling. However, a ruling which is not unfavorable to Argentina will not call off the legal attacks with a latent threat of a permanent attachment. And they will not be able to comply with an unfavorable ruling because their inability to pay. So, in order to solve this problem with benefits for all concerned, the most viable option is probably a new swap. Perhaps today nobody is considering this solution, but over time it will turn out to be the best option.
El Cronista
The problem, as we have said earlier, is that the argument produced at the New York courts based on the inability to pay, which has been essayed by low-income countries, has not been taken into account so far by the courts here.
In the Argentine case judged by Griesa, this is not the first time that the lack of resources to pay has been posited. In particular, following the 2001 default and until the 2005 swap, they presented arguments based on need in order to avoid executing the sentences passed by Griesa (the first was at the start of 2003) and in order to allow such a swap to take place, based on avoiding an economic crisis if this did not come about. Both Griesa and the Court of Appeals went along with this and allowed the operation to take place. In fact, a ruling at that time passed by this court was based on the need to allow the swap to take place on the basis of political arguments, without reference to either legal clauses or jurisprudence. This was considered a special sentence.
Later, Griesa and the Court again allowed the second swap, turning down attachments and requests to not permit this operation. But so far they have never issued a ruling which expressly takes into account the inability to pay. Nobody knows what could happen at the hearing scheduled for the 27th of this month, nor what the Court’s next ruling might be, although it cannot be ruled out that this aspect may be taken into account in the eventual execution of the sentences. But perhaps 2013 will not be like 2003, 2005 nor 2010 in terms of the position taken by Griesa and the Court to support the country.
It is however clear that one thing concerns claims for only US$1.4 billion and another is potential claims for US$20 billion. Now, if the sentence is favorable to the plaintiffs and requires immediate execution (something which cannot be dismissed), with both appeals pending—en banc and at the Supreme Court—the question which one asks oneself is what will the government do. One option is to pay up. But this goes against their expressed will to pay, and now their ability to pay. Hence, this path, according to the briefs issued by the government, will not be the one taken. So what will happen then? First is the scenario which most concerns the government, but is also one which the holders of the swapped bonds, the Bank of New York, the US and the international markets are trying to avoid. This is the case wherein the government would not pay, and if the ruling stands, the payment of the bonds currently being honored will be at risk, as they will no longer be able to use the New York financial marketplace to pay them (as the payment would be attached and thus these would be defaulted). Thus, the option is to attempt the complex operation to change jurisdiction and payment agent or trust fund, in order to continue making the payments in Europe, or even in Argentina. But this will take time to set up and also demand agreement from 85% of these bondholders (and that there be no less than 65% of adhesion for either series).
Furthermore, there is a question mark hanging over the Bank of New York, specifically, if it will continue to act as trust fund or payment agency in this scenario. Also, this situation implies disobedience towards the U.S. judiciary, which has required the government to comply with the rulings whichever be their result. The payment transaction in Europe implies an open stand-off with the judicial branch. The consequences of this are difficult to predict. But there is one thing which is sure: if the transaction involving payment in either Europe or Argentina has even the slightest point of contact with New York, it will be at risk, as the court in this jurisdiction may clamp down on it. This would make this option much more complicated.
In any case, what is obvious is that the amounts of the claims made by the holdouts threaten their ability to collect, and would eventually push Argentina to the edge of default. Faced with this, the Government has said that its payment proposal is based on the swap conditions. But a forced swap does not seem to be acceptable for the New York justice system. We believe that the strongest line of defense is the so-called trust fund wherein payments are made in Argentina and thus outside any US jurisdiction. But so far, the justice system in that district has made no reference to this alternative.
Hence, whatever the scenario, perhaps the current solution to the problem of the debt may not be at hand for either of the parties, and thus the possibility of avoiding a default (which would damage everybody’s interests) is completely subordinate to the result of the ruling. However, a ruling which is not unfavorable to Argentina will not call off the legal attacks with a latent threat of a permanent attachment. And they will not be able to comply with an unfavorable ruling because their inability to pay. So, in order to solve this problem with benefits for all concerned, the most viable option is probably a new swap. Perhaps today nobody is considering this solution, but over time it will turn out to be the best option.
El Cronista
Lorenzino is traveling to the G-20 summit to seek allies against the vulture funds
The government considers that there is a legal vacuum which allows the holdouts to act in this way and is hoping for support before the hearing set for the 27th in New York
Tuesday, February 12, 2013
The government considers that there is a legal vacuum which allows the holdouts to act in this way and is hoping for support before the hearing set for the 27th in New York
Tuesday, February 12, 2013
ESTEBAN RAFELE Buenos Aires
Economy Minister Hernán Lorenzino will travel tomorrow to Moscow to take part in the finance ministers’ meeting of G-20 countries which will be held in the Russian capital from Thursday to Saturday. The meeting will focus on the handling of sovereign debt. This is a promising framework for the government which is looking to drum up international support against the vulture funds in view of the upcoming hearing on the 27th in the New York courts.
According to official sources, the government is seeking allies in what it considers to be an international legal vacuum, giving room to act to the funds which bought defaulted debt or debt from states on the verge of bankruptcy only to later sue for it.
In the international context with Greece, Spain , Portugal and Italy under pressure from their external debts, it will help to highlight the Argentine case, as it is dealing with lawsuits one decade on from having declared a default, and with two restructuring processes under its belt.
The government has in its favor the support from the United States in the lawsuit held in the New York Courts. Barack Obama’s administration has presented briefs to the Court of Appeals of the Second District (sic) of this city as amicus curiae of Argentina and stated that a ruling in favor of the litigating funds NML Capital and Aurelius under the terms disposed by the lower court judge Thomas Griesa is contrary to this country’s interests and those of the international financial system. Griesa had ordered Argentina to pay 100% of the debt owed to the vulture funds for US$ 1.33 billion, and had ordered the trust fund banks to route part of their regular payments towards paying off these commitments.
However, the G-20 would also be the first international test for Lorenzino following the motion of censure issued by the IMF against Argentina when it found that the country lacks trustworthy inflation and growth statistics. Argentina is the only country in the group which does not allow the review contemplated by Article IV of the Fund’s bylaws “which the country has rejected since it paid off its debt with the organization in 2006”, something which has even prompted requests for the country to be expelled from the G-20.
Argentina will this year welcome an IMF mission to review its local financial system, something which takes place regularly in all other G-20 countries. The Government believes that it will pass with flying colors. This will be the first audit performed by the Fund since the Article IV review in 2005.
Lorenzino will insist that there is a need to reform the G-20, and holds among his supporters other emerging countries headed up by Brazil and China which are calling for more influence in decision-making processes. He will also take to the next stage his attack on credit rating agencies, based on the charges of fraud brought last week by the US government against Standard & Poor’s which it is suing for 5 billion dollars.
Issues such as financial regulations for banks, stock market companies and credit agencies have tended to come up repeatedly at the most recent G-20 summits, where countries are given to congratulating themselves on their efforts to reduce the global crisis and at the same time commit to reducing economic incentives without undermining employment sources.
On this occasion, the emerging nations will also fight to encourage the promotion of infrastructure projects in developing states, a proposal led by Indonesia and Brazil, among others, and supported by Argentina.
Economy Minister Hernán Lorenzino will travel tomorrow to Moscow to take part in the finance ministers’ meeting of G-20 countries which will be held in the Russian capital from Thursday to Saturday. The meeting will focus on the handling of sovereign debt. This is a promising framework for the government which is looking to drum up international support against the vulture funds in view of the upcoming hearing on the 27th in the New York courts.
According to official sources, the government is seeking allies in what it considers to be an international legal vacuum, giving room to act to the funds which bought defaulted debt or debt from states on the verge of bankruptcy only to later sue for it.
In the international context with Greece, Spain , Portugal and Italy under pressure from their external debts, it will help to highlight the Argentine case, as it is dealing with lawsuits one decade on from having declared a default, and with two restructuring processes under its belt.
The government has in its favor the support from the United States in the lawsuit held in the New York Courts. Barack Obama’s administration has presented briefs to the Court of Appeals of the Second District (sic) of this city as amicus curiae of Argentina and stated that a ruling in favor of the litigating funds NML Capital and Aurelius under the terms disposed by the lower court judge Thomas Griesa is contrary to this country’s interests and those of the international financial system. Griesa had ordered Argentina to pay 100% of the debt owed to the vulture funds for US$ 1.33 billion, and had ordered the trust fund banks to route part of their regular payments towards paying off these commitments.
However, the G-20 would also be the first international test for Lorenzino following the motion of censure issued by the IMF against Argentina when it found that the country lacks trustworthy inflation and growth statistics. Argentina is the only country in the group which does not allow the review contemplated by Article IV of the Fund’s bylaws “which the country has rejected since it paid off its debt with the organization in 2006”, something which has even prompted requests for the country to be expelled from the G-20.
Argentina will this year welcome an IMF mission to review its local financial system, something which takes place regularly in all other G-20 countries. The Government believes that it will pass with flying colors. This will be the first audit performed by the Fund since the Article IV review in 2005.
Lorenzino will insist that there is a need to reform the G-20, and holds among his supporters other emerging countries headed up by Brazil and China which are calling for more influence in decision-making processes. He will also take to the next stage his attack on credit rating agencies, based on the charges of fraud brought last week by the US government against Standard & Poor’s which it is suing for 5 billion dollars.
Issues such as financial regulations for banks, stock market companies and credit agencies have tended to come up repeatedly at the most recent G-20 summits, where countries are given to congratulating themselves on their efforts to reduce the global crisis and at the same time commit to reducing economic incentives without undermining employment sources.
On this occasion, the emerging nations will also fight to encourage the promotion of infrastructure projects in developing states, a proposal led by Indonesia and Brazil, among others, and supported by Argentina.
El Cronista
Griesa goes for Banco Nacion’s accounts
Tuesday, February 12, 2013
New York Judge Thomas Griesa demanded that Banco Nacion report on the movement of accounts of the Argentine state or officials acting on its behalf in some 15 countries and complained about the continued delays by the financial entity in responding to his requests, in another case pushed by the fund NML Capital, of Elliott, seeking plausable Argentine assets to attach.
It’s seen as a different case from the one passing through the Court of Appeals and that will begin to be decided in two weeks, on the 27th of the current month, when Argentina and NML will gather before the court and speak – 15 minutes each side. The court is reviewing Greisa’s ruling which obliges the government to pay US$1.33 billion to the vulture funds under the argument of pari passu, or equal treatment.
At the same time, the government asked for an en banc review of the Court of Appeals, something uncommon but which has the backing of the administration of Barack Obama, which last week filed a brief asking for the decision to be reviewed by that same court from October 26. That day, the court upheld the argument of pari passu and that Argentina must pay and sent the decision back to Greisa to decide the method of payment. The lower court judge ordered a payment in cash into an escrow account and ordered financial agents to hold payments on restructured debt if the government didn’t deposit the US$1.33 billion demanded.
In the hearing, the government will insist on the possibility of reopening the exchange.
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