Bond swaps to be re-opened but nothing more for holdouts

Hernán Lorenzino

The government is planning to complete this week fine-tuning its own interpretation of the pari passu equal treatment of creditors ordered late last year by the New York Appeals Court, based on offering holdouts resisting the 2005 and 2010 haircuts equal payment to those creditors accepting the debt bond swaps in those years.

The countdown is in fact less than a week because on Good Friday the deadline will expire for presenting an offer on defaulted debt to the NY Appeals Court.

Although Economy Minister Hernán Lorenzino’s team remains tight-lipped on the Argentine proposal, any offer superior to that already paid to bond-holders accepting the 2005 and 2010 haircuts is firmly ruled out.

At the last Appeals Court session in this case on February 27 (with Vice-President Amado Boudou and Lorenzino in attendance), Jonathan Blackman, the lawyer representing Argentina, said that it would be “impossible to obey voluntarily” any ruling paying the holdouts (or “vulture funds” in the Cristina Fernández de Kirchner administration’s jargon) more than the rest or sidetracking payments from bond-holders accepting the swaps as a violation of national legislation.

Representatives of such bond-holders (who constitute 93 percent of the creditors from the 2001 default) have endorsed this position.

Immediately at stake is 1.3 billion dollars worth of bonds which Judge Thomas Griesa ordered repaid in full to “vulture funds” last November but the fallout could lead to claims on many times that sum and trigger a technical default.

Former Finance Secretary Guillermo Nielsen, the main architect of the 2005 debt haircut, yesterday criticized the government strategy of offering to re-open the bond swaps in order to accommodate the holdouts, saying that it would be a better strategy to go fishing for a more favourable court ruling in the specific case or spin it out in order to prevent the issue from dovetailing into the entire 2001 rescheduled debt.

Even paying out the 1.3 billion dollars might be the lesser evil, Nielsen argued, because repealing the “Padlock Law” (which bans the re-opening of the 2005 and 2010 bond swaps) would send out the wrong message to the international financial community.

Herald with Telam and DyN

http://buenosairesherald.com/article/127179/bond-swaps-to-be-reopened-but-nothing-more-for-holdouts