Lead Articles:
El Cronista: ‘Claudio Loser: “A currency rate split is a possible solution, but not a perfect one’”
Clarin: “Debt: expectation over the payment offer for the vulture funds”
El Cronista: “Debt: an offer will be presented to US justice this week”
El Cronista: “The Lock Law”
El Cronista: “Holdouts: for the Deutsche Bank, Argentina will achieve a favorable agreement”
Ambito Financiero: “The Executive defines proposal for reopening the debt swap”
Telam: “Argentina finalizes the payment formula that it will present in New York”
OTHER NEWS ITEMS:
- The March 24 “Day of Memory” demonstrations, marking the anniversary of the military coup against Isabel Peron in 1976 and a traditional mobilization of human rights groups in the country, featured a massive rally in Buenos Aires where the groups allied with Cristina’s government demanded “democratization of the courts”, and La Campora militants clashed with independent leftist groups in the crowd.
- El Cronista reports that the government is considering invoking the anti-terrorism financing laws adopted at the insistence of the FAFT in order to seize the soy harvest stocks from the farmers and sell them off. Jose Sbattella says that the law could define “as terrorism the manipulation of the market or an attack on governability.” The government wants the farmers to liquidate their stocks immediately to bring in billions of desperately needed dollars from export taxes, to help alleviate the soaring “blue” dollar rate.
- Carlos Pagni writes in La Nacion that, for Cristina, the currency clamp that Axel Kicillof convinced her to get behind has failed. “For the President, a dangerous adversary has appeared by being unmanageable. It’s not pope Bergoglio. It’s the dollar,” he writes. “The concern over the price of the currency is to the economy what the rupture with Daniel Scioli is to politics: a signal that Kirchnerism is being submitted to a structural modification.” For this reason, he argues, she must now give up the “tenacious official refusal to acknowledge inflation and combat it instead.”
- Gustavo Bazzan writes in Clarin that with “ a currency clamp, price freezing and now more imports,” Argentina is “following in Venezuela’s footsteps.” He tracks the similarities in how events unfolded in the management of the economy by the Chavez government, and how Cristina is following suit. At the end, he notes Venezuela is now giving up on its currency clamp and held a massive 32% devaluation. “Two steps they still haven’t taken here. Will it only be a matter of time?”, he concludes.
- El Cronista reports that the INDEC and the government are now speeding up their work to have a new national CPI to debut by the end of this year, to take effect by the fourth quarter, after the elections.
- Mary O’Grady’s WSJ piece on how Cristina is “seeking to financially ruin the independent press” in Argentina has run in Spanish in today’s La Nacion.
- Most papers report that a robbery attempt against Amado Boudou during an official visit in Quito, Ecuador, on Friday was thwarted by Ecuadoran security forces. Details were scarce from the official announcement by the Ecuadoran government about the incident.
TRENDING TOPICS/ARGENTINA on Twitter:
- “Dia de la Memoria” has been trending in the top ten since yesterday and into this morning.
El Cronista
Claudio Loser: “A currency rate split is a possible solution, but not a perfect one”
He said the parallel dollar is soaring because it isn’t known where the economy is going. He said that to split the currency market would be a short-term solution.
Monday, March 25, 2013
By DOLORES OLVEIRA Buenos Aires
Economist Claudio Loser said that the splitting of the currency exchange market is an “intermediate solution, not perfect, but possible” for the distortions that the parallel dollar is creating.
Also, the ex-IMF official and director of Centennial-Group Latin America anticipated that if Argentina doesn’t improve the conditions of the swap for the holdouts, the Court in New York will order it to pay 100% of the debt.
The following is the dialogue he had with El Cronista:
–How do you evaluate the currency exchange situation in Argentina?
–It’s the tip of the iceberg. It reflects a very important state of imbalance. A currency exchange market that is totally controlled, because it’s late with respect to internal inflation and that abroad, with Brazil and Chile, for example, and that makes exports suffer, while imports are subject to restrictions. The government says that it’s speculation, but it’s nervousness because it isn’t know where the economy is going.
–However, couldn’t such a small market be under the management of a few speculators?
–Here one could again be semantic. People say, “I’m going to buy dollars,” and this is the symptom and not the illness. I believe is isn’t speculation. I don’t have knowledge of the size of the market, but what I have be able to observe is that people make transactions based on the exchange rate because they are afraid. The issue in the final instance is that people are very nervous. It’s an impression based on many years of observing what happens in Argentina and in other parts.
–How would you view a solution of a split currency market?
–It’s better than what there is now. To go from a chaotic situation to an orderly one, at times it’s better to go to a split, but it’s not something long term. It can exit in Venezuela. But the experience in Argentina and Latin America shows that those with things in order don’t use it, because it impedes the running of one or another market. It’s an intermediate solution, not perfect, but possible.
–What do you believe the Argentine government will present this Friday before the Court in New York?
–It’s of utmost importance to present a serious proposal, that is acceptable for the counterparty. Of course, the holdouts say that they have to be paid US$1.3 billion, but it should be as close to that as possible. I believe that the government already has it clear that it can’t drag this out more. The court will make a decision and it doesn’t have another option, because the chance of going to the Supreme Court is very difficult.
–Do you believe that the holdouts would accept a similar swap to the one Argentina already offered?
–They didn’t accept it. There is an element here of compensation that has to exist because they were left aside. There was a unilateral action. The government said to those who didn’t enter: “we are forgetting the debt.” The others accepted the bonds, extinguished their obligation. I don’t believe that there is an action for the bondholders that entered. They lost their chance and cannot go back and reopen it. To end this and to end the exile in the financial world, the government should offer the holdouts something more; it remains to be seen how they present it so that it is not seen as something very different. If they don’t offer something different, the court will go for the “you have to pay everything.” They will say that there is no willingness to find a solution.
–How are relations going between Argentina and the IMF? And in the World Bank and IADB?
–I am not hearing anything but deadlines are running out. In Argentina, the vote of censure was read as being “once more they challenge us and still are.” But this is a formal process and if the measuring of inflation and other things is not solved, the process continues. There is a machinery that is functioning and it ends in expulsion from the Fund, which means from the World Bank also. Since 1950 such a thing has not happened, and it could happen in two years. It’s not that they will stretch out the deadlines. The next one is the end of the year. But they will continue losing points. And every time there are more countries voting against it in the World Bank and the IADB, and this complicates long term and cheap financing that Argentina can get. Silence doesn’t imply acceptance on the part of the Fund.
Clarin
Debt: expectation over the payment offer for the vulture funds
Monday, March 25, 2013
After the hearing on February 27, the Court of Appeals in New York ordered Argentina to explain how it wants to pay the vulture funds. The deadline it gave to do so expires on Friday. That is to say the countdown has already begun. The big question on Wall Street is if with the payment formula that the government will present will it seek to avoid a technical default or not.
“It’s difficult to know what will happen. But I believe that the government will not offer the holdouts a better offer than the one they gave to those that entered the swap of 2010. And if that is that, the court will not accept it and before paying the vulture funds the 100% that it owed them as Judge Griesa ordered, Argentina will fall into technical default,” said Shahida Shahriar of Constellation Capital to Clarin. This week, Moody’s lowered from “B3” to “Caa1” the rating on debt the country issued in 2005 and 2010 to restructure 93% of the debt that remained unpaid since the 2001 moratorium, coinciding with Shahriar’s fears.
There are other operators that are more optimistic: “I believe that the formula that they will present will be a little better than the one they offered in 2010 and that the holders of restructured bonds will accept changing theirs for others, committing not to sue over what they give the holdouts. Nobody wants an adverse ruling,” said the representative of a large group of restructured bondholders who asked not to be identified, to Clarin.
“There is agreement among the restructured bondholders that a default would not be good for anyone,” he said.
Another rumor pointed to the government being in conversations with the holders of Argentine bonds in default that are part of the case together with NML and Aurelius. If they manage to convince them before the presentation, it will be easier for the court to accept the proposal..
According to what Clarin could confirm, defense attorneys for Argentina Jonathan Blackman and Carmine Bocuzzi are communicating with the Economy Ministry advising them on the legal aspects of Friday’s presentation. But the last word will be with Cristina Kirchner, who said that while she is ready to pay the vulture funds, she made it clear that she will not make an offer to them that is better than the previous one.
“Every kind of rumor is circulating in Buenos Aires,” said Eugenio Bruno, of the Garrido Firm, to Clarin during a phone conversation. “Some are saying that it will be an offer without a haircut but that comes due in 2040; others say that it will not have a bond attached to GDP but there are others who say that it will indeed have that kind of bond, but it’s not clear what they will do with the interest owed from 2001 to 2014.”
The order that the government received on February 28 says that Argentina “seemed” to propose during the hearing a “payment formula” different from Griesa’s, which demanded 100% payment of the debt to the holdouts at the same time that the holders of restructured bonds are paid.
The court asked for details about three points: how and when the government proposes to pay the original bonds (read as the bonds the vulture funds have) which have not been paid in 11 years; what is the interest rate that is proposed to pay on the original bonds from now on; what kind of guarantee, whatever it is, can the government offer to instrument its proposal, and what will be the calendar for that action.
El Cronista
Debt: an offer will be presented to US justice this week
Monday, March 25, 2013
The government will complete the swap proposal that the country intends to make the default bondholders before the New York Court of Appeals, after this court gave them until Friday to make their last offer
The Court had ruled in favor of the NML Capital Fund belonging to Elliott, which called for “equal treatment” for its bonds, worth 1.3 billion dollars. Then, the first instance judge Thomas Griesa obliged the country to pay up in cash and threatened to expropriate the payments made to service the regularized debt if Argentina did not comply. The Government lodged an appeal and in a hearing held on February 27th, ratified that it would not pay more than the terms proposed in the 2010 swap. This would, according to the country represented “equal treatment”.
Two days after the hearing, the Court requested the country to formalize a payment proposal before March 29. Although the economic team headed up by Hernán Lorenzino has been working on the Argentine proposal behind closed doors, it is clear that any solution proposed by the country will be no better than that made to the exchange bondholders.
Position
On February 27th, the Government presented the Argentine position through the attorney representing the country, Jonathan Blackman from the firm Cleary Gottlieb, in the presence of the vice president, Amado Boudou and Lorenzino. The attorney said that Argentina “could not obey voluntarily a Court order involving paying the vulture funds more than the rest, or which involved using the funds reserved for the exchange bondholders. This would violate national legislation and lead to a wave of lawsuits from the exchange bondholders.
A report from Deutsche Bank which circulated during the annual IADB assembly considered that the Court is more concerned with executing the payment by Argentina than with finding a solution to restructuring the debt. “The Court of Appeals from New York seemed to concern itself mostly with its role in executing the bond contracts, instead of reaching a negotiation between the parties, which is questionable in the light of its impact on third parties,” said the report, speculating with two technical solutions which Argentina could offer the Court. One of these formulas involves paying with Par bonds at a similar haircut rate at current net value as the swaps offered by the country during 2005 and 2010.
The government will complete the swap proposal that the country intends to make the default bondholders before the New York Court of Appeals, after this court gave them until Friday to make their last offer
The Court had ruled in favor of the NML Capital Fund belonging to Elliott, which called for “equal treatment” for its bonds, worth 1.3 billion dollars. Then, the first instance judge Thomas Griesa obliged the country to pay up in cash and threatened to expropriate the payments made to service the regularized debt if Argentina did not comply. The Government lodged an appeal and in a hearing held on February 27th, ratified that it would not pay more than the terms proposed in the 2010 swap. This would, according to the country represented “equal treatment”.
Two days after the hearing, the Court requested the country to formalize a payment proposal before March 29. Although the economic team headed up by Hernán Lorenzino has been working on the Argentine proposal behind closed doors, it is clear that any solution proposed by the country will be no better than that made to the exchange bondholders.
Position
On February 27th, the Government presented the Argentine position through the attorney representing the country, Jonathan Blackman from the firm Cleary Gottlieb, in the presence of the vice president, Amado Boudou and Lorenzino. The attorney said that Argentina “could not obey voluntarily a Court order involving paying the vulture funds more than the rest, or which involved using the funds reserved for the exchange bondholders. This would violate national legislation and lead to a wave of lawsuits from the exchange bondholders.
A report from Deutsche Bank which circulated during the annual IADB assembly considered that the Court is more concerned with executing the payment by Argentina than with finding a solution to restructuring the debt. “The Court of Appeals from New York seemed to concern itself mostly with its role in executing the bond contracts, instead of reaching a negotiation between the parties, which is questionable in the light of its impact on third parties,” said the report, speculating with two technical solutions which Argentina could offer the Court. One of these formulas involves paying with Par bonds at a similar haircut rate at current net value as the swaps offered by the country during 2005 and 2010.
El Cronista
The Lock Law
Monday, March 25, 2013
The former secretary of Finance and lead official in the 2005 debt restructuring, Guillermo Nielsen, said that reopening the swap is not a good alternative for an agreement with the holdouts litigating in the United States and suggested that the best strategy would be to get a legal ruling, as compliance with this would not imply violating the Lock Law.
“The point of the Lock Law was to send the international financial community a message that Argentina was not going to reopen the swap, but this in no way interferes with any future legal rulings. However, it does forbid legal agreements,” said Nielsen.
El Cronista
Holdouts: for the Deutsche Bank, Argentina will achieve a favorable agreement
The investment bank estimated that it was 60% likely for the country to reach a payment agreement with the New York Court, 40% likelihood of a technical default
The investment bank estimated that it was 60% likely for the country to reach a payment agreement with the New York Court, 40% likelihood of a technical default
Monday, March 25, 2013
By VERONICA DALTO Buenos Aires
Deutsche Bank (DB) analysts are “cautiously optimistic” in feeling “tempted to forecast a positive result in the lawsuit following Argentina’s proposal scheduled for March 29,” according to a report of March 14. As a result, the investment bank thinks it 60% likely for Argentina to reach agreement with the Court with a 40% likelihood that a default will spark a hike in credit default swaps (CDS) against the country.
This week the Government must present the US Justice with its holdout payment proposal, as part of the lawsuit between the country and the vulture funds. The Appeal Court must take into account this presentation before making its ruling, whose result could either leave Argentina on the brink of a technical default or commit it to pay the debt in harsher conditions than those expected.
“The authorities could well take the discussion or debate over the debt as a relatively speedy economic impulse, or before the mid-term October elections. Similarly, they might fear an adverse result as this would fuel the growing sense of economic deterioration,” they said.
Within the more upbeat scenario, the bank foresees the bond prices improving on their performance last October 25, the day before the New York court put the country up against the wall by obliging it to pay the entire amount of the debt in litigation, 1.3 billion dollars, to the funds.
In the less optimistic scenario, the bank estimates that it is 20% likely to incur a complete default, and 20% likely to go into technical default. In this case, the payments in the New York jurisdiction would be embargoed as the Bank of New York would be taken as an intermediary in the ruling. However, the DB thinks that Argentina could reroute the payments in other jurisdictions such as Euroclear or DTS and the non-dollars denominated bonds would not necessarily be compromised. “This could even allow Argentina to offer bonds under international law in jurisdictions other than the US,” says the report, although prices would drop below those recorded last month.
“The Argentine authorities are unlikely to lose their strong desire to pay, as they still fear that the default on the debt will remain a synonym for political crisis,” it concludes.
This week the Government must present the US Justice with its holdout payment proposal, as part of the lawsuit between the country and the vulture funds. The Appeal Court must take into account this presentation before making its ruling, whose result could either leave Argentina on the brink of a technical default or commit it to pay the debt in harsher conditions than those expected.
“The authorities could well take the discussion or debate over the debt as a relatively speedy economic impulse, or before the mid-term October elections. Similarly, they might fear an adverse result as this would fuel the growing sense of economic deterioration,” they said.
Within the more upbeat scenario, the bank foresees the bond prices improving on their performance last October 25, the day before the New York court put the country up against the wall by obliging it to pay the entire amount of the debt in litigation, 1.3 billion dollars, to the funds.
In the less optimistic scenario, the bank estimates that it is 20% likely to incur a complete default, and 20% likely to go into technical default. In this case, the payments in the New York jurisdiction would be embargoed as the Bank of New York would be taken as an intermediary in the ruling. However, the DB thinks that Argentina could reroute the payments in other jurisdictions such as Euroclear or DTS and the non-dollars denominated bonds would not necessarily be compromised. “This could even allow Argentina to offer bonds under international law in jurisdictions other than the US,” says the report, although prices would drop below those recorded last month.
“The Argentine authorities are unlikely to lose their strong desire to pay, as they still fear that the default on the debt will remain a synonym for political crisis,” it concludes.
Ambito Financiero
The Executive defines proposal for reopening the debt swap
The president will receive the offer today. Before Friday it will have to be presented in the New York court.
Monday, March 25, 2013
By Carlos Burgueño
Cristina de Kirchner, in person, will receive in the coming hours the final proposal for the reopening of the swap on debt still in default. When the chief of State give it the green light, that will immediately give the authorization to attorneys for the firm of Cleary, Gottlieb, Steen & Hamilton to present it to the Court of Appeals for the Second District (sic) of New York, and will formalize the Argentine proposal. The maximum deadline is Friday the 29th, a date set by the same judges of the court, who then will take no more than 15 days to rule on the validity of the offer and its presentation to the creditors that are suing before that tribunal.
The President will have to back the technical proposal, which has as a central axis to not present a more favorable plan than the one closed in 2010, and that was put together by Economy Minister Hernan Lorenzino. That call, which completed the first swap of 2006 (sic), managed to raise the percentage of total adhesion to the restructuring of the debt to 93.4%. However, falling outside of it was US$8 billion, of which 50% is held by the vulture funds who, whatever the decision of the court, will insist on collecting 100% of the debt plus interest, bringing the case to the U.S. Supreme Court.
Argentina, for its part, is betting that at this judicial level at least two of the three judges (Daniel Barrington, Reena Raggi and Rosemary Pooler) would back the presentation of the Argentine offer. After it would have to reopen the swap starting with the approval of Congress, and it’s expected that the offer would be accepted by the holders of some US$2.5 billion, in a fashion of raising the percentage of support for restructuring to above 95% and the court would end up ruling in favor of Argentina. The attorneys from the firm representing the country speculated before the economic team as well that it is possible that in a scenario of this kind, the Supreme Court would decide not to take the case as there would be no violation of federal law that would merit it. As a counterparty, the attorneys from Cleary, Gottlieb, Steen & Hamilton affirm that if the ruling is negative for Argentina, there is still a chance for the Supreme Court, as it would mean that Bank of New York Mellon, BONY (the country’s trustee) would be affected by a federal law. This would happen if the court upholds the ruling from last November from Thomas Griesa, according to which if Argentina doesn’t pay the vulture funds in cash at the next debt maturity, BONY also is liable for a crime.
What Cristina de Kirchner will have to decide is if the proposal of emission of new debt in conditions equal to or worse than the call of 2010 is adequate. There is speculation over an emission of a Par bond, in conditions similar to the proposal that at the time was also made by the now-Economy minister who was then the finance secretary to Amado Boudou. Lorenzino’s team ended the last few hours putting the offer together that will now be sent to New York for a check of the technical legal details. It will probably return today to Buenos Aires, and arrive at the presidential office for her to endorse, reject or modify.
On February 27, in the hearing where he spoke before the three judges of the court on the Argentine case, the attorney from the New York firm, Jonathan Blackman, confirmed that the country was ready to make a new proposal for the reopening of the swap, but that it could not imply a bigger payment than the one they had acknowledged to the creditors that had accepted the two previous calls. It was made clear that a situation of this kind would violate Argentine legislation because there is a “lock law” that impedes a better offer than the one from 2010, and by demanding a bigger payment than the second swap to the vulture funds, the country would enter into a new debt crisis. This would be by the previous complaint from the 93.4% of creditors that accepted the first two calls, and that could demand the same improvement. In that case, according to what Blackman himself put forth starting with the facts compiled by Lorenzino’s team, Argentine debt would increase to US$43 billion.
Telam
Argentina finalizes the payment formula that it will present in New York
Monday, March 25, 2013
The government will end this week by giving form to the swap proposal that the country will make to the vulture funds before the Court of Appeals in New York, which will have as a point of departure the idea of “equal treatment” with the creditors that entered the restructuring process brought forward in 2005 and 2010.
Staring on Monday a countdown begins of five business days: on Friday the 29th of March the deadline passes for the country to present to the Court of Appeals an offer to pay the debt in default, according to the request sent to the country on the 29th of February by that court, two days after the hearing was held.
Despite that the economic team led by Hernan Lorenzino has been working in total silence on the Argentine proposal, it can be said that any solution proposed by the country wouldn’t be better than the one made to the bondholders that entered the debt swaps in 2005 and 2010.
On February 27, the government expressed with clarity the Argentine position, through the country’s legal representative, Jonathan Blackman, from the firm of Cleary Gottlieb, and in the presence of Vice President Amado Boudou, and Lorenzino.
There Argentina’s lawyer said that Argentina “cannot voluntarily obey” a request from the court that implies paying more to the vulture funds than the rest, or that involves the payment of funds destined for bondholders that entered the aforementioned exchanges.
This is why a decision of that kind would violate national law, and because it would affect the bondholders that entered in a voluntary manner.
This last position was reinforced by the opinion of the involved third parties, to whom the three judge panel listened to attentively and dedicated a greater period of time that expected for speaking.
It is the position of the Bank of New York, and the Exchange Bondholders Group (EBG), which represent 93% of the debt in default of 2001, by which the debt restructuring was offered.
The hearing was convened after, in November of last year, Judge Thomas Griesa determined that the vulture funds could collect 100% in warrants in default that they hold – around US$1.3 billion – in just one payment, with the resources of the coupon attached to GDP that was paid last December to the creditors.
This measure was suspended starting with a decision by the Court of Appeals of New York, that is now charged with analyzing a payment formula for the holdouts.
To date, a result cannot be projected about the decision of the Court of Appeals.
Economic studies from investment banks highlighted the aspect that the court showed itself most concerned with by executing payment from Argentina, that seeks a solution to the debt restructuring, as in the report from Deutsche Bank distributed during the annual assembly of the IADB.
"The Court of Appeals of New York seemed to focus on a role of executing bond contracts, instead of reaching a negotiation between the parties, which is questionable in light of the impact on affected third parties,” argued the report that speculated with two technical solutions that Argentina could offer the court.
One of those formulas involves the payment on Par bonds with an acknowledgment of a similar haircut on the present net value that the swaps had in 2005 and 2010.
LA PRENSA (DyN): “For Nielsen, the reopening of the swap is not a good alternative”
"The sense of the Lock Law was to send a message to the international financial community that Argentina wouldn’t reopen the swap but in no way does it get at eventual judicial rulings. What it does impede is making judicial agreements,” explained the ex-finance secretary
Former finance secretary and the main official in the debt restructuring of 2005, Guillermo Nielsen, argued that it’s not a good alternative to offer the reopening of the swap to reach an agreement with the holdouts that are suing in the United States and suggested that the best strategy is to get a “judicial ruling” because responding to the sentence does not imply a violation of the Lock Law.
"The sense of the Lock Law was to send a message to the international financial community that Argentina wouldn’t reopen the swap but in no way does it touch on eventual judicial rulings. What it does impede is making judicial agreements,” explained the ex-finance secretary.
Nielsen, in an interview with DyN, argued that “faces with this scenario, what is more opportune is to get a judicial sentence because this way a ruling cannot be extended to the whole restructured debt.”
"It has to be achieved and, from my point of view it’s manageable, that this be a sentence because whatever it is the result would not fall upon the rest of the debt. Any agreement would roll back all of the debt,” explained the economist.
Nielsen emphasized that “it’s very important not to speak of a reopening. Reopening is when somebody wants to attract the investor community and that is not relevant here. What is relevant is what the three judges think.”
Argentina has to present on Friday the 29th to the Court of Appeals in New York a proposal of payment of US$1.3 billion to honor a sentence of the lower court judge, Thomas Griesa, that has been upheld by that appellate court.
About that proposal, the ex-diplomat evaluated that “there are different variables” and detailed that “basically what is needed is to kick it to the judges for them to believe that what the holdouts are receiving is reasonable.”
In that sense, it was said to be closer to offering a “Par bond at 30 years.” “This would mean that one respects the face value of the bond – or US$1.33 billion – but paying it over various decades diminishes the present value,” he added.
Also, he said that “if it is accepted, it would be a warrant with very low liquidity, which is a way to punish the holdouts because there wouldn’t be markets to trade it.” However, he admitted that “the situation is open” and remarked that “what is fascinating in this case is that no rules can be placed on the judges. The judges will make you think.”
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