The Ex-Im Bank of China – the government financial entity that finances foreign trade operations for the Asian giant – filed a case against Grenada based on the theory of “pari passu” (equal treatment for all creditors) over the dishonoring of a loan of US$32 million.

Lead Articles:

 

La Nacion: “They argue that a ruling against the country in New York would not affect other cases”

 

El Cronista: “Debt: unexpected “help” arrives from China in the battle with the vulture funds”

 

Clarin: “Economy prepares the offer for the vultures”

 

OTHER NEWS ITEMS:

• Cristina is in Caracas joining a huge parade of people, leaders and media attending the public wake of Hugo Chavez.  She told reporters in the lobby of her hotel that “men like Chavez don’t die, they sow” and that while “Bolivar was a liberator of peoples, Chavez was a liberator of minds.”   Meanwhile, in an interview with Radio Del Plata, Security Minister Nilde Garre said it was “a suggestive coincidence” that “many of these leaders who were producing profound transformations in Latin America” were suffering with cancer, giving ground to Nicolas Maduro’s contention that Chavez was “infected” with cancer as part of a conspiracy by “Venezuela’s historical enemies.”  Garre’s comments were heavily covered in the independent media and ignored in the pro-K press.  Her spokesman at the ministry refused to comment or explain her remarks.
• La Nacion reports (Silvia Pisani) that Washington observers don’t expect Venezuela to lose its regional influence after Chavez’s death, given its oil money will not disappear.  They also don’t expect any immediate improvement in Venezuela-U.S. relations.  Roger Noriega is quoted in the story.  He is also asked about whether Argentina will reposition itself to fill the void of Chavez’s role: “President Cristina Kirchner is too busy with the growing difficulties in her own country to launch a regional leadership adventure, and I don’t think she is interested in it.”

 

TRENDING TOPICS/ARGENTINA on Twitter:

• “Hugo Chavez” and “Venezuela” continue to trend in the top 10.

 

 

 

La Nacion

They argue that a ruling against the country in New York would not affect other cases

 

Thursday, March 07, 2013

 

By Jorge Oviedo

 

The case of Argentina is isolated and an adverse ruling from the New York court in the dispute with the bondholders that didn’t accept the swaps of 2005 and 2010 would not have any consequences in other debt restructurings, argues Joshua Rosner,  CEO of Graham Fisher & Co, a researcher and finance consultant on Wall Street.

 

Rosner, in a paper distributed to his clients and which LA NACION had access to, says that fears are unfounded that an adverse ruling could affect future restructurings, above all in Europe.

 

The American consultant argues: “Due to the documents in support of Argentina, we chose to consult with top level sources in the Eurozone and we were surprised to find that none of the relevant European sources expressed any concern around a sentence having any impact on European restructurings,” said the report.

 

The paper asserts that for having entered into the biggest default in history and for the “lock” law (which prohibits any possibility of reopening new swaps) “Argentina truly occupies a unique place in the history of debtor countries.”

 

And it recalls that a New York court said in 2008 that “Argentina has made many contributions to the law of foreign insolvency, through its numerous defaults on its sovereign obligations and also through what we could call the diplomacy of default.”

 

Rosner emphasizes that the conduct that Argentina has carried forward “is unprecedented”, particularly for the application of the lock law, refusing not once, but many times in the courts of New York to make any payment to the bondholders that didn’t accept the swaps.

 

That, says Rosner, is what the courts sanction for not respecting “equal treatment”.  And he argues that there is no reason to believe that this behavior will be repeated sometime in the future in other cases.  For which the case of Argentina is, in his opinion, limited to the country and has scarce chances of affecting other debt restructurings in the future.

 

Rosner concludes that an adverse ruling would not generate a contagion in future restructurings basically because:

 

• The bonds in dispute don’t have collective action clauses, which makes it difficult to have supermajorities oblige the rest to accept refinancings.  Today bonds are emitted with those clauses or with another that says that local legislation could be introduced to them, and cites the example of Greece, which took place in 2012.
• It would not affect the payments to multilateral credit organizations, like the World Bank, the Inter-American Development Bank (IADB) and the International Monetary Fund (IMF) because New York courts have said as much and because the plaintiffs made it clear.
• A sentence against Argentina wouldn’t mean an incentive to fall outside of future debt renegotiations with the goal of collecting without a haircut through litigation.  “To litigate is costly and the result is uncertain, and sophisticate investors are going to understand that, with the focus placed clearly on the unique behavior of Argentina, the court’s ruling will do little to improve their bets.”
• The new conditions and the new terms introduced in bonds impedes a case like Argentina’s from being repeated in the future.  Rosner points out that Greece made a debt restructuring in December of US$27 billion with a haircut of more than 60% with very few complaints.

 

And that in the same month, Belize made an agreement to restructure US$550 million and that in neither of the two cases was there advice to stay out of it and sue on the basis of a sentence against Argentina.

 

 

El Cronista

Debt: unexpected “help” arrives from China in the battle with the vulture funds

 

Thursday, March 7, 2013

 

By Juan Cerruti

 

The Economy Ministry is moving ahead at this moment in putting together the document that it will present to the Court of Appeals in New York in the tug of war with the vulture funds.  And it is studying different options to set forth Argentina’s position with respect to the offer that it is ready to make to the creditors.  However, an unexpected item arose in recent hours, and from the most unexpected place: China.

 

The Ex-Im Bank of China – the government financial entity that finances foreign trade operations for the Asian giant – filed a case against Grenada based on the theory of “pari passu” (equal treatment for all creditors) over the dishonoring of a loan of US$32 million.  The relevance of the China v. Grenada case is that it sheds more light on the consequences of applying the principle of pari passu and the consideration that judges must have for its ramifications. So said the chief economist for emerging markets at JP Morgan, Vladimir Werning, in a report sent to clients.  

 

According to the analyst, it cannot be ruled out that the precedent of this case even ends up being favorable to Argentina, since it would show there are judges more inclined to listen to a “second opinion” before directly applying the principle of “pari passu.”

 

It would even increase the chances that in Argentina’s case before the vulture funds the Court of Appeals accepts the government’s request for the case to be reviewed by what is known as an “en banc” (by the full set of judges making up the court, which are 13, instead of the three current ones.)

 

Werning also adds in his report a fact that is not small: the case of China v. Grenada is not in the presentation that Argentina made before the Court of Appeals.  But it would not be strange for the country’s attorneys (the firm of Cleary, Gottlieb, Steen & Hamilton) to include it in the next filing.

 

In the interim, the government is working to write up the document that it will have to send to the court in New York before the 29th of this month, and which will contain an idea of what is the “feasible” offer that the country is ready to make to the vulture funds.  While President Cristina Fernández de Kirchner already confirmed that the proposal will be in line with the swap held in 2010, some modifications are not ruled out.

 

What is being debated these hours among the technical staff at Economy with Argentina’s attorneys is the level of detail that should be in the document.  They “are studying” having the description of the offer being more “general” so that there is greater levels of freedom to negotiate what the country will end up with.

 

 

Clarin

Economy prepares the offer for the vultures

 

Thursday, March 07, 2013

 

By Tomás Canosa

 

The economic team is working to present on March 29 to the Court of Appeals in New York a proposal of payment for the vulture funds.  It wants to take advantage of the final days to honor the request and for that, according to what this newspaper could find out, a concrete strategy is still not decided about what will be offered to the bondholders that bought the warrants for pennies and are now demanding to collect 100%.

 

At the Palacio de Hacienda they are optimistic: the belive that if the court would have wanted to complicate things for Argentina, they would have given it only a few days to put the proposal together and not until the 29^th, as they did.

 

Economy Minister Hernan Lorenzino and the rest of the team are analyzing different alternatives.  While Cristina Kirchner already anticipated that the same will be offered that was given the bondholders that entered the swap of 2010, the scenario still has many edges.

 

The government could disburse in case the payments that it already made for the GDP coupon in recent years if it wants to make the proposal more attractive.  Or it could deliver a bond for those payments.  These are some of the possibilities for not violating the Lock Law and making the offer more or less attractive.