Argentina default averted for now
IFR 1974 9 March to 15 March 2013 | By Christopher Spink
A technical default by Argentina has been averted this month after a court order asked the sovereign to set out alternative ways of paying holdout creditors. The New York Appeals Court said on March 1 that the plan should be lodged by March 29, just two days before coupons are due on restructured Argentine bonds.
Lawyers said that a current stay on the judgment that requires Argentina, and payment agent Bank of New York, to pay US$1.3bn in claims when it makes payments to investors holding restructured bonds would therefore not be lifted this month. The US$1.3bn of payments are due to be made to hedge fund Elliott Advisors and other plaintiffs.
“The next interest payments would appear to be safe from an Argentine default,” said law firm Shearman & Sterling. “Because the panel gave Argentina until March 29 to submit its payment proposal, no injunction would likely apply before the April payments are made.”
The market has responded positively. Both local and international Argentine sovereign debt has recovered most of the losses incurred on February 28, when the arguments heard by the Appeals Court was viewed as negative for Argentina.
Some commentators had predicted a judgment before the next interest payment in early April. But with this now less likely, Boden 2015s went from 83.5 to around 88 and five-year CDS narrowed from 3,037bp to 2,500bp, as the immediate probability of default receded.
Misplaced optimism
However, some think this optimism misplaced as Argentina remains unlikely to escape the ruling to pay holdout creditors in full and so default on restructured bondholders. The latest court order does not suggest that a compromise, by which holdouts can re-enter the exchange, will be allowed.
“The court was not offering to moderate its views. Rather, it was holding Argentina’s feet to the fire, since the lawyers for Argentina had seemed willing to make some payments at least,” said Mitu Gulati, professor at Duke University School of Law.
Last week, Argentina’s President Cristina Kirchner said the country would not pay holdouts more than it offered in 2005 and 2010 exchanges. “Argentina has made clear that it isn’t willing to compromise one bit,” said Gulati.
Meanwhile, Taiwan’s state-owned Ex-Im Bank, which held out from Grenada’s 2005 exchange, has drawn inspiration from the Argentine saga and last week lodged a suit in the Southern District Court of New York to seek full payment from the sovereign on its US$32m outstanding debt.
Keine Kommentare:
Kommentar veröffentlichen