Lead Articles
El Cronista: “New York court rejects review of ruling and government says it will not pay the vultures”
El Cronista: “Judges more hostile than expected and unreceptive”
El Cronista: “The ‘trial of the century’ didn’t go unnoticed in New York: long lines and demonstrations”
El Cronista: “The next play by the vulture funds: claims at ICSID” (Mentions ATFA)
El Cronista
New York court rejects reviewing ruling and the government says it will not pay the vultures
The options that are left for Argentina got narrower last night, after the Court of Appeals refused an “en banc” review to reinterpret the reach of pari passu.
Friday, February 28, 2013
The hearing held by the Court of Appeals for the Second Circuit of New York narrowed the legal options that are left for Argentina in its battle against the vulture funds. The judges refused the Argentine petition that the ruling to pay the vulture funds be reviewed by the plenary of the court (en banc) with which should said ruling came to be upheld, the only possibility left is to file an appeal to the U.S. Supreme Court.
With this decision, the door closed to allowing a review of the criteria of pari passu that the court applied against Argentina, by which the country ended up being obliged to pay the plaintiffs in a manner that the bondholders accepted in the debt swaps of 2005 and 2010. So reported to El Cronista two sources that were present at the hearing yesterday, who in every way acknowledged that such likelihood was indeed low.
The crux of the Argentine presentation was the ratification that it will not honor the sentence that orders it to pay 100% of the sentence to the holdouts that are demanding US$1.33 billion and its last offer is to make a payment on the terms of the last swap.
Attorney Jonathan Blackman, from Cleary Gottlieb who represented the country, was to the point: “We will not voluntarily obey an order like that,” he said. He alluded to the sentence that Judge Griesa, who ordered the deposit of 100% of the complaint in an escrow account and called for the attachment of the regular payments if it was not honored.
Argentina, remarked the attorney, wants to find a solution that would be “feasible and that doesn’t create a terrible confrontation.” That, confirmed officials later on, is a payment on the terms of the swap of 2010 which completed a renegotiation of around 93% of the defaulted debt from 2001.
The Argentine delegation was led by Vice President Amado Boudou and Economy Minister Hernan Lorenzino. It was not necessary that they be there, but President Cristina Fernandez decided that the “high level” mission would be present to mark the political importance of the ruling.
The Argentine representation had to respond to about a hundred questions, many of which gave a whiff toward a favorable ruling for the litigating fund NML, of Elliott, property of Paul Singer.
It was Judge Reema Raggi, a Republican, who was the most hostile towards the country. At the start of the hearing, she said that the court must ensure the honoring of contracts and not “re-write them”. Raggi also said that “it seem inappropriate” to not comply with an order of the court for the country to pay investors what they judicially claim, according to Reuters. She even called the holdouts “victims”.
The hearing began at 2pm (4pm in Argentina) and lasted more than two hours. Boudou and Lorenzino arrived 15 minutes before. Also attending were Finance Secretary Adrian Cosentino, Argentina’s representative before the IMF, Sergio Chodos, and the assistant secretary for legal affairs, Matias Isasa, the director before the World Bank, Guido Forcieri, and the ambassador to the United States, Cecilia Nahon.
Argentina spoke for 40 minutes. “We represent a government and governments are not asked to do things that are fundamentally against their principles,” Blackman said. Later on, Boudou told the media: “We are not going to accept situations in which Argentine law is infringed,” which means that a better offer cannot be made to the bondholders than the ones who entered the swap. Theodore Olson, representative of NML and the Aurelius fund, used 25 minutes. He insisted that they wanted to collect 100%, but said that he didn’t want to affect third party interests, in a clear allusion to the bondholders that entered the swap and whose payments would be harmed.
Representatives of the bondholders with restructured bonds spoke. Attorney David Boies said: “We are innocent parties. I represent people that did what they thought was right. What they did should not be used against them.” Also Bank of New York, trustee, had its minutes.
The court will take between one and two months to decide. The best of all worlds for Argentina is that its proposal to pay on the terms of the swap be accepted. The court could also uphold Griesa’s sentence but cut off attachments on the payment agents, which would be a relief and would avoid a technical default. The other scenario is the most feared: the absolute ratification of the lower court ruling.
El Cronista
Judges more hostile than expected and unreceptive
Friday, February 28, 2013
By Laura García. Finance editor
The first impressions at the exit of the hearing were unanimous. And rotund. The level of hostility toward Argentina surprised those that adventured yesterday to the crowded New York court and many left less convinced of the likelihood that Argentina would elude going face to face with a technical default. Thus, the theory of a “divided ruling” was smashed and the majority doubted last night, after two hours of legal arguments and rhetorical flourishes, the scenario where Bank of New York would be exempt and the exchange bondholder would be allowed to keep collecting.
“The panel was not very receptive to Argentina’s arguments. And it was interesting that one of the judges pointed to the role of the court as making contracts be complied with and not rewritten,” said Alberto Ramos, chief economist for Latin America from Goldman Sachs.
For Diego Ferro, of the Greylock fund, which entered the second Argentine swap, “there was more hostility than was expected. It would suggest a greater agreement with Griesa’s ruling than was supposed. Also, many times the questions in the hearing aren’t always indicators of what the courts think. But it would seem that Argentina’s situation is very complicated. Above all if Bank of New York’s position is not modified. This point was surprising, because the questions implied that the entity is a kind of agent both for the bondholders and Argentina.”
Daniel Chodos, strategist for Credit Suisse bank, said last night: “Our impression is that the perspectives for the litigation are negative. We believe that Bank of New York will remain reached by the measure, while the judges showed themselves to be more open to consider alternatives to pro-rate payment.”
“I don’t know very well how to interpret all the speculation around the payment formula. But it didn’t come out well for Argentina. And there was less sympathy towards Bank of New York than was expected,” said Anna Gelpern, law professor at American University.
The hearing seems to have sided with an attorney from the first line from the previous day who said: “I see everyone is very calm. But I wouldn’t be so sure that they are not going to touch Bank of New York. Here we have to think of alternatives in paying even if it comes out badly. But any American that helps Argentina will be an accomplice. The law firm itself that advises the country will not be able to do it anymore.” One of the most acute analysts of Wall Street reasoned last night: “My fears are coming true. I continue to believe that the likelihood of Bank of New York being compromised is high. It remains to be seen what the reaction of the government will be. It’s very good to defy and cause fear as a strategy. But it’s not the same as threatening to pull the trigger.”
El Cronista
The ‘trial of the century’ didn’t go by unnoticed in New York: long lines and demonstrations
Friday, February 28, 2013
EL CRONISTA Buenos Aires
The room where the hearing was convened by the Court of Appeals in New York was filled for hours before the meeting began. A great expectation generated around the even pushed dozens of people, among them attorneys, financial analysts and journalists, to struggle at the door to be able to enter on time.
However, the entrance was not easy for them, as they had to go through various security checkpoints and leave their cell phones to not have any kind of communication with the outside until the hearing ended. They had to line up for four hours to be authorized.
Added to them were the representative of the parties – the government and the vulture funds – which obliged the court to open another room and yet another on a lower floor to be able to accommodate all those people present. The event started at 2pm (4 in Argentina) and lasted more than two hours.
The court listened to the positions of Argentina in the two blocks of 20 minutes and the creditors that entered the swap also in the two blocks of the same time. As such, the attorney for the holdouts gave a single speech for 25 minutes and the attorney for Bank of New York only spoke 10 minutes. For Argentina, in the front row were Vice President Amado Boudou and Economy Minister Hernan Lorenzino.
Defense
Argentina’s position, put forward by the members of the government present and the legal representatives for the country, was also defended by the non-governmental organization Jubilee, dedicated to fighting against the power that the vulture funds exercise over countries with debt in default. The NGO programmed a vigil from 1pm to 3pm, when the hearing started, at the doors of the court, with a call through a letter to attend “the most important trial of the century” according to Financial Times. That entity asked that the “court put itself on the side of the people” and warned about the damage that it would do to the economies of poor countries with a ruling in favor of these speculative investors.
El Cronista
The next play by the vulture funds: claims at the ICSID
The most active creditors are studying legal actions against the country in that international tribunal. There the government has already accumulated million-dollar sentences against it.
Friday, February 28, 2013
CARLOS ARBÍA Buenos Aires
In case the Argentine government decides not to pay and appeal again, if there is a favorable sentence for the vulture funds – from the Economy Ministry they believe that those creditors could continue the battle in the ICSID (International Center for the Settlement of Investor Disputes) which is part of the World Bank, where private companies made complaints against devaluation and the default and which Argentina wants to leave. “In the ICSID they could weigh one of the next battles if the vulture funds insist on suing Argentina there,” argue those in government. One part of the 7% that didn’t enter the swaps I and II decided to go tot that international organization and would focus on US$4.5 billion in original dollars, which would have to then add interest and payments not made that the holdouts demand.
In August 2011, the foreign creditors decided to change their strategy on the default and went to the ICSID. Some 60,000 Italian bondholders making up the GCAB – whose main leaders are the American Hans Hume and the Italian Nicola Stock – used the bilateral treaty on investment protection (BTI) which Argentina signed with Italy and most countries in the G-20 in the 1990s. The GCAB went to ICSID because, in theory, its decisions are not subject to appeal. There were also presentations at the ICSID from a group called ATFA (American Task Force Argentina) which, as their website indicates, seek “a just solution to the default on Argentina’s debt”. The surprise is that among their more than 600 members are the vulture fund Elliot Associates. This is also the owner of NML, the fund led by Paul Singer who together with Aurelius are the ones suing Argentina in New York court.
NML in 1999 obtained a sentence from the Court of Appeals in New York that Peru pay it US$58 million for a debt the fund purchased for only US$11 million. NML, a branch of Elliot Management, registered in the Cayman Islands, bought with a big haircut warrants of Argentine debt, and rejected the two bond swaps in 2005 and 2010. And then it filed a series of lawsuits before different jurisdictions, which sided with them many times.
On March 4, 2012, New York federal Judge Thomas Griesa issued a ruling favorable to the vulture funds around the pari passu clause, which orders the debtor to treat all creditors in the same manner. After the Griesa decision on October 26 came the order for Argentina to pay some US$1.33 billion to the vulture funds. But the ICSID arises as another option for the vulture funds if the ruling is adverse to them.
The bondholders complained before ICSID in 2011 that the cessation of payments on the bonds constitutes a violation of the Bilateral Treaty on Investments (BTI) signed between Italy and Argentina. This decision of the tribunal was widely criticized by Argentina, as Article 8 of the BTI says that investors must, in the first place, begin their demands before national jurisdiction and cannot go to ICSID until 18 months have passed in the initial suit. It’s good to note that cases before ICSID are also not automatic and at least six months are needed for a complaint to turn into a case.
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