Lead Articles:
Clarin: “Argentine disadvantage in the hearing for the vulture funds”
El Cronista: “The upper echelon of Economy travels to New York for hearing against vultures”
El Cronista: “Local summit in the run-up to the holdout show”
Ambito Financiero: “Lorenzino will go to the hearing against the vulture funds”
OTHER NEWS ITEMS:
- AF reports that Argentine bonds in dollars under New York jurisdiction are continuing to get hammered on the secondary market. El Cronista adds that the “holdout effect” of an anticipated adverse ruling in New York, matched with the political turmoil in Italy, ended with a 0.5% drop in the Merval stock index.
- Cristina’s attorney general, Alejandra Gils Carbo, met with reporters from various newspapers across the spectrum to increase the public calls for judicial reforms and “democratization” of the courts, saying that the judicial branch is “illegitimate” today because it is “corporative, shady and run by lobbies.”
- John Kerry’s comments reiterating U.S. neutrality in the Falklands question was covered in all newspapers this morning.
- Clarin reports that the U.S. State Department said through a spokesman that, despite reports in the British and Argentine press about a possible missile program going on, the U.S. “has no information or reason to think that Argentina has changed its nuclear non-proliferation policy.”
- All papers report that the opposition and the FpV are fighting “vote by vote” over the fate of the Iran accord in the House of Deputies. The vote is scheduled for Thursday.
TRENDING TOPICS/ARGENTINA on Twitter:
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Clarin
Argentine disadvantage in the hearing for the vulture funds
It is tomorrow in New York. It must reverse ruling from lower court and another from the appellate court.
Tuesday, February 26, 2013
By Ana Baron
Argentina arrives at the hearing that will take place tomorrow in the Court of Appeals, to determine when and how it must pay the vulture funds, at a clear disadvantage. Judge Griesa already ruled twice against our country and the Court of Appeals itself once. Argentina will try to reverse those rulings. But – what is its chances of success?
The vulture funds want to collect 100% of the value of the Argentine bonds in default they hold. In the hearing the Argentine government will argue that it cannot pay them that amount because that would be unfair to the bondholders that entered the swap and accepted a haircut of more than 70%.
The U.S. court ruled on various occasions that Argentina must pay in all manners. Faced with the Argentine resistance to pay, to be able to collect the vulture funds tried to attach every kind of Argentine asset abroad. From the funds that the Central Bank has deposited in the Federal Reserve of New York to, recently, the Frigate Libertad. The Argentine government managed to judicially impede all these attachments. It continued not paying and until now its conduct has had no cost that it was not willing to accept.
The hearing that will take place tomorrow in the Court of Appeals of New York is key because for the first time there is the possibility that if Argentina doesn’t pay, the cost will be very high.
It would put into play the two exchanges that it has had and the entire economy. Why?
What is in play is a ruling in which Griesa stipulated that the Argentine government must pay NML and its partners the total they are owed (US$1.33 billion plus interest) at the same time it pays the holders of restructured bonds. The ruling establishes also that if Argentina tries to pay the restructured bondholders without paying the vulture funds, the payment agent – Bank of New York – and every other bank that participates in the operation will be sanctioned. This second point is key.
In effect, if Argentina refuses to pay the vulture funds and the banks refuse, consequently to execute the payment to the holders of restructured bonds to avoid sanctions, our country will again fall into default.
That is to say, if Griesa’s ruling is upheld, and Argentina decides not to pay the vulture funds as it has done until now, it’s the first time that the consequences will be very serious. Not only for our country, but also for the international payment system, which is to say the banks. Also, according to the Argentine government itself, if Griesa’s ruling is not reversed there will be other holdouts that will ask for the same treatment that will carry Argentina’s debt to reach a total of US$43 billion.
That is to say, a sum greater than the reserves.
As such, during tomorrow’s hearing, the vulture funds – NML, Aurelius and others – will have 20 minutes to argue why Griesa’s ruling should be upheld. Argentina, Bank of New York and the restructured bondholders will have a total of 29 minutes to explain why it should be reversed.
El Cronista
The upper echelon of Economy travels to New York for hearing against vultures
Minister Hernán Lorenzino and Finance Secretary Adrián Cosentino traveled last night to the United States. There is moderate optimism in the government.
Tuesday, February 26, 2013
Economy Minister Hernán Lorenzino departed last night for New York to be present in the key hearing that Argentina will have to face tomorrow in the Court of Appeals for the Second Circuit in that city against the investment fund NML Capital, which is demanding US$1.33 billion for its bonds in default.
Together with Lorenzino, who got on the plane at the last minute, were traveling Finance Secretary Adrian Cosentino and Assistant Legal and Technical Secretary Matías Issa. The participation of the officials in the hearing is not necessary and was interpreted as a gesture of the transcendence of the ruling for the country, on the one hand, and as a sign of optimism in the face of the eventual ruling of the court, which nobody is hazarding to make predictions on.
Argentina, represented by the firm of Cleary Gottlieb, and the fund NML Capital will have 20 minutes to speak on their arguments before the court. Also formulating their considerations will be the investment funds with restructured debt that support the country and the fund Aurelius, another of the plaintiffs. Then, it is estimated that the court will take until the end of March or April.
The higher court has already upheld the complaint of the “vulture” funds, who argued that the equal treatment clauses or pari passu of the bonds allow for them to collect and they are being discriminated against because Argentina is paying its restructured debt but not the obligations in default. Then, Griesa ordered that the country has to pay 100% of the sentence into an escrow account. If not, he ordered the trustees to retain pro rata US$1.33 billion from the regular payments. The appeal stayed the ruling. At the same time, the country criticized the first ruling of the Court of Appeals and asked for an en banc review, of the plenary of that court.
Among the supports Argentina has received the stand out is the United States government, which filed amicus curiae briefs. Barack Obama’s administration understands that a contrary sentence to the Argentine government in the terms that Griesa issued will affect future sovereign debt restructurings.
In its last brief before the Court of Appeals, Argentina said that a sentence against the country would set off lawsuits for more than US$43 billion. Other estimates are more modest, but devastating. Intermediary banks are expecting US$20 billion in lawsuits against the country.
The most benevolent scenario for the country is that the Court of Appeals accepts its posture of reopening the debt swap as a final offer to the vulture funds.
El Cronista
Local summit in the run-up to the holdout show
Tuesday, February 26, 2013
By LAURA GARCÍA Finance Editor
It was at the Hotel Alvear. A closed-door meeting for members of the Emerging Markets Trade Association (EMTA). A meeting to discuss, on the eve of the big holdout hearing, the case of NML v. Argentina. And the implications of a ruling that has the same experts wandering through a maze of legal technicalities and multiple scenarios.
“The issue is very interesting. You didn’t see anyone reading their Blackberry,” said an attendee yesterday, who will try to attend the hearing in New York. “It is going to turn into a picaresque event. Many are going to end up going to see who is there.”
The majority today are ruling out a victorious outcome. What is in play, and which occupied the attention of the experts yesterday, is around by what measure the payments chain will be affected. This is, if Bank of New York will be exempt, beyond the ruling being upheld against the country. “It’s not so easy to stop payments to the exchange bondholders. But if Argentina cannot pay, what does it do? It will have to find other mechanisms to do it. It doesn’t seem to be simple. Nor does it seem to be what it is looking for. But that doesn’t mean that reaching this point that will be the dilemma,” said another attendee.
Participating in the meeting were various Argentines as speakers: Marcos Buscaglia (Bank of America), Javier Errecondo (Errecondo, Gonzalez & Funes attorneys) and Diego Ferro, of the Greylock fund.
Yesterday, among the fanatics of the issue, the word of the day was Belize. Yes, Belize. It’s that the country, which just restructured its debt, included in its new bonds an unprecedented clarification: it specified how to interpret the vague pari passu clause. And it rejected a reading like the one being sought to be imposed on Argentina today. Three lines that could save it a decade of litigation.
Ambito Financiero
Lorenzino will go to the hearing against the vulture funds
The minister traveled last night by order of Cristina de Kirchner
Tuesday, February 26, 2013
By Carlos Burgueño
A criticism of the ratings agencies and the mention of the country’s economic effort to honor its financial obligations since 2003. The possibility of opening the debt swap under the same conditions, not better ones, that was called in 2010. And the threat of an unmanageable increase of US$43 billion in the foreign demand if the ruling is negative. Cristina de Kirchner gave these instructions in person to Economy Minister Hernan Lorenzino this weekend. He, along with Finance Secretary Adrian Cosentino and Assistant Legal and Technical Secretary Matias Issa, will today be at the offices of the firm of Cleary, Gottlieb, Steen & Hamilton that is rperesenting Argentina, to finalize the design of the final strategy that will be put forth tomorrow to the three judges of the Court of Appeals in New York. The minister – with his team – was sent by the head of state to be present in the hearing, and, minute by minute, personally report back to Buenos Aires.
The one charged with presenting the country’s position will be Jonathan Blackman, one of the two attorneys from Cleary, Gottlieb, Steen & Hamilton, which has been covering the case since its beginnings in 2006 in the court of Thomas Griesa. The other professional that the firm delegated, Carmine Boccuzzi, will also be in the court, but for the lack of time it was decided that Blackman will be the one speaking tomorrow. Both were in contact yesterday via videoconference with the economic team led by Lorenzino and Cosentino to finish preparing the brief in which the presentation of Argentina’s position will be based and presented to the judges. These will be Daniels Barrington Parker (Republican, expert in economic crimes and who wrote the ruling against Argentina on October 26), Reena Raggi (Republican, expert in commercial crimes) and Rosemary Pooler (Democrat, personal friend of Hillary Clinton, in principle the most benevolent to Argentina’s position). While there are specualtions, yesterday in Economy it was said that nobody can anticipate any trend about what the final ruling will be. The only ground that is for sure at this moment is that the parties will give their positions, and the questions that the three judges make after the 15 minutes of regulation time could give an impression about the path that the ruling could take. The vulture funds and the holdouts (NML Elliot, of Paul Singer) will have 15 minutes. The attorney that will defend the fund will be another Republican, Ted Olson, famous for having made the arguments in 2000 for George W. Bush to be elected president over Al Gore.
There is a historic curiosity that this case has. The attorney that will defend Argentina but in the name of the bondholders that entered the swap, headed by the ex-vulture fund Fintech, of Mexican David Martínez Sepúlveda, will be David Boies, who in that electoral dispute of 2000 defended Democrat Al Gore. Boies already said to Boccuzzi in December, after Griesa’s ruling against Argentina and the “stay” set by the court blocking the decision to pay in cash the US$1.33 billing before the 15th of that month, that for him it would be “revenge”.
The order from Cristina de Kirchner is to put forth that beyond the impossibility and injustice of ruling against the country when 93% of the bondholders accepted the two calls to restructure the debt in default, there are serious risks of multiplication of requests from these bondholders. It’s the proposal of the “we toos” who would complain about the haircuts they suffered in the swaps of 2005 and 2010, not only in New York but also in the rest of the international financial markets where both swaps were presented. Lorenzino himself has let it be known that the number of that potential debt would be around US$43 billion, adding in something more than US$8 billion in vulture fund complaints and some 13 bondholders that joined Singer’s lawsuit, another US$22 billion in restructured debt emitted in New York, and another US$13 billion in the rest of the world. This would be the sum that Argentina would have to pay if the court upholds the ruling of recognizing 100% of the debt in a cash payment to the vulture funds, as Griesa had ruling last November. If one takes into account that yesterday the Central Bank’s reserves were US$41.837 billion, it’s clear that it would be utopian for Argentina to be able to get a similar ruling.
Any other decision of the appellate court would be a financial problem for the country and would mean a game of terms and payments that would be difficult to design. In that same manner, it is understand that a ruling against Elliot and its partners would be rejected by the vulture funds. In both scenarios, whatever the ruling, it is most likely that the loser will decide to appeal to the U.S. Supreme Court. There is speculation that the court would accept taking up the issue, as there is a precedent (a ruling in 2012 about Central Bank reserves not being subject to attachment) and the quantity and quality of implicated parties in the case (the American government, Bank of New York Mellon, Anne Krueger, the Wall Street financial community, the Paris Club, etc.)
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