Lead Articles:
La Nacion: “Banks predict a hard setback for the government in the holdouts case”
Telam: “France: Argentina wins lawsuit against Paul Singer’s vulture fund”
El Cronista: “Global bankers warn about the risk of pardoning Argentina”
El Cronista: “Fund that entered the swap demands that Argentina’s obstinance not be tolerated”
Ambito Financiero: “Sign: Argentina wins lawsuit against vultures in France (the U.S. remains)”
The Economist: “Payback postponed”
La Nacion
Banks predict a hard setback for the government in the holdouts case
Friday, April 5, 2013
By Martín Kanenguiser | LA NACION
The International Institute of Finance (IIF) representing the main banks from all over the world, yesterday stated its opinion that the New York Court of Appeals will confirm the ruling obliging the Government to pay a group of holdouts some USD 1.33 billion. Furthermore the IIF considered that it will be very difficult for the Supreme Court of justice of the United States to accept a review of the case and affirmed that if the Government tries to pay its bonds in another jurisdiction, there will be another default.
In its monthly monitoring report of the capital markets, the Washington-based institute covers the complex case which the Government has already lost in two instances and in which it now remains to be seen how the vulture funds and 13 minority investors will be paid.
The monitoring report explains how the Government last weekend made an “identical” proposal to that made in 2010 which was rejected by the bondholders who brought the lawsuit in New York. Hence, the IIF is confident in its prediction that “the Court will throw out the Argentine proposal and take a decision after receiving the response of the plaintiffs on the 22nd of this month”. In fact, La Nación was able to find out that the holdouts have still not defined whether they will wait until that day or if they will bring this forward, in order to get a swifter response from the justice, which they consider will once again be favorable to their interests.
In this scenario, the only option remaining for the Government is to “try and request a hearing before the Supreme Court which is unlikely to take a case such as this one, which refers to a state commercial law.” The other option according to the institute is for the Government to try to transfer the location for the bond swap to Argentina to avoid possible attachment by the US Justice.
In this alternative, “which will not be easy and will require acceptance by 75% of the bondholders who accepted the previous swap, this would be a default on the swapped bonds.”
Lawyers consulted by La Nación believe that it would be hard to hold a swap in the country as it will be difficult for the bondholders who want to take part to avoid attachment by the US Justice.
This uncertainty is reflected in the “high rates of Argentine bonds in dollars under New York law”, concluded the IIF. The institute concluded that Argentina found itself in these dire straits “because of its own poor conduct, seen over more than a decade of one-sided treatment of its creditors”.
The report mentions the “compulsory” offers which preceded the 2005 and 2010 offers in reply to the IIF’s request to negotiate a friendlier offer which would reduce the number of holdouts. And also the default that Argentina has with the Paris Club since the end of 2001.
The IIF compares this case with other sovereign restructuring processes and indicated that “fortunately”, Argentina’s attitude was not emulated by other countries. “In the eleven other sovereign restructuring processes, the debtors have negotiated efficiently with their creditors,” said the IIF analysts.
Despite the abysmal difference between Argentina and Cyprus (plunged into a major financial crisis, with a freeze on bank accounts) they said that “the decisions taken by both countries will have important consequences for creditors’ rights”.
The Bank of America also issued its opinion in a report drawn up by analyst Marcos Buscaglia, that the sentence would be negative, although it explained that the country could make its payments while the sentence is still awaiting execution.
In this sense, it will be key to know whether the Court of Appeals will remain on stand-by while the Supreme Court deliberates whether it will take the case or not so that Argentina can gain time.
“Bonds under local law are less exposed in the short term, although their capacity to pay may deteriorate if Argentina decides not to pay the swapped bonds. In line with this view, the Bulltick investment bank said that the “Argentine offer is unlikely to alter the decision of the Court of Appeals.” At any rate, it said that an adverse ruling will not alter the Government’s decision to try to pay the bondholders who do accept payment, in any way it can.
The country triumphs over NML in France
The Argentine government has definitively won the lawsuit against the NML vulture fund which sought to attach Argentine assets in France, according to the Telam state news agency.
The decision was taken by the French Supreme Court (Cour de Cassation) in a 15-page statement wherein it rejected three appeals presented by NML against the Paris and Versailles Courts.
These courts had ordered the attachments on taxes owing to Argentina by the local subsidiaries of Total Austral, the bank BNP Paribas and Air France to be lifted, according to official sources who spoke to Telam. The ruling is based on the opinion of the French Justice which considers that Argentine assets in that country may not be attached by a creditor in litigation.
The ruling of the French Court comes at the time when in New York another case pitting Argentina against the vulture funds is being tried.
Telam
France: Argentina won the lawsuit against Paul Singer’s vulture fund
Friday, April 5, 2013
The Government won all the instances in a lawsuit against the NML vulture fund, belonging to multimillionaire Paul Singer, who sought to attach assets in France. The French Court threw out three appeals made in this sense.
The decision was taken by the French Supreme Court (Cour de Cassation) in a 15-page statement wherein it rejected three appeals presented b y NML against the Paris and Versailles Courts.
These courts had ordered the attachments on taxes owing to Argentina by the local subsidiaries of Total Austral, the bank BNP Paribas and Air France to be lifted, according to official sources.
The ruling of the French Court comes at the time when in New York another case pitting Argentina against the vulture funds is being tried.
The Argentine minister of Economy, Hernán Lorenzino told Telam that this lawsuit is yet more proof that the vulture funds “are always trying to force the hand of justice, but they have come up against a Government which defends the interests of the Argentines”. “It is important to continue defending Argentina’s interests with a strong legal strategy in all the courts and with all the legal instruments at hand”, added the official.
Lorenzino underlined that “the hostility of the vultures knows no limits, and it is necessary for the judges to understand how extreme their arguments are. In this case, the French justice stopped them from making a move on tax issues.”
In the three rulings, the French courts considered that giving up sovereign immunity which Argentina accepted in the contracts for the bonds issued during the 1990s does not extend to tax obligations, and hence there are no assets which may be attached and thus affect the country.
The vulture funds were hoping that the French companies would pay them the funds which their Argentine subsidiaries must pay as taxes, and the French courts denied them this option.
The case began formally on April 3, 2009 and concluded four years later with a favorable ending for Argentina.
The NML fund belongs to Elliott, the same one which attached the Frigate Libertad in Ghana for two months and which lost the battle at the International Court of the Sea in Hamburg, which made it possible for the ship to return to Argentina last January 9, thanks to the success of the legal and diplomatic strategy deployed by the authorities.
The ruling of the French Court comes at the time when in New York another case pitting Argentina against the vulture funds is being tried.
The New York Court of Appeals took matters into its own hand after Judge Thomas Griesa ruled in favor of the vulture funds and ordered the payment of 1.33 billion dollars from the funds earmarked for the exchange bondholders from 2005 and 2010.
After Argentina presented its payment proposal to the vulture funds before the Court, this entity forwarded the brief to the vulture funds which must reply before April 22, as to whether or not they will accept it.
If they reject it, they must explain why they believe that the Argentine proposal does not apply the principle of equal treatment.
Argentina presented a payment offer to the Court of Appeals in the early hours of Saturday where it maintained that the vulture funds were being offered the same as the exchange bondholders of 2010. This includes a Par bond without a haircut, due in 2038, for the small bondholders and a Discount bond due in 2033 with a haircut for the large bondholders. The small bondholders will be able to collect interests due in cash, while the large bondholders will receive a Global 2017 to cover the interests due.
Both large and small bondholders will receive coupons attached to economic growth.
(NOTE: This wire story was picked up by El Cronista and Pagina/12.)
El Cronista
Global bankers warn about the risk of pardoning Argentina
Friday, April 5, 2013
VERONICA DALTO Buenos Aires
Awaiting the respond to payment proposal that Argentina filing in New York court to the vulture funds, similar to the last swap, the bank banks of the world reacted with concern over the possibility that the decisions that are taken in the Argentine case end up “condoning the unilateral actions” of the country, and for the implications that could have for the international sovereign debt market, weakening creditor rights in the future and the legal certainties that sustain them.
This is how they see it in the monitoring of the capital markets from the Institute of International Finance (IIF), the global association of the biggest financial entities of the world, where they are also analyzing the Cyprus bailout.
The IIF didn’t fail to place the Argentine case in the “correct historical context.” This is that “Argentina finds itself in this complicated situation by its own behavior, evidenced by more than a decade of unilateral treatment of its creditors.” “Since the private sector creditors and investors don’t have the luxury of waiting forever, many (but not all including thousands of small investors) have been obliged to accept the swap that Argentina offered in 2005 and 2010.”
A portion of the holdouts now have until April 22 to take the Argentine offer or not as payment for their claim of US$1.3 billion. Then the court could delay a couple of months to issue its sentence, which the IIF already predicts will be a rejection towards Argentina.
The entity, which coordinated the interests of the big banks in the rescue of Greece, pointed out that the Argentine case had “fortunately” been a “rare case” among the other 11 recent debt restructurings, where the sovereign debtor could negotiate with private creditors an agreement that was “mutually acceptable upon an opportune and orderly basis.”
For IIF, the current debate over improving the framework of sovereign debt restructurings, in legal terms or clarifying the meaning of pari passu in bond contracts, “should be done carefully to not condone the unilateral actions by a sovereign debtor and weaken the rights of subsequent creditors, especially the right to demand reparations in court.”
“If it does that, it could put on the front burner the essentially inapplicable character of assets before a sovereign debtor, raising uncertainty, risk and costs in the sovereign debt markets to the detriment of all the participants in the global financial markets,” he added.
According to the IIF, the negative experience of Argentina and the positive ones for the rest of the countries “should serve to be an incentive both for the sovereign debtor as well as private creditors to believe in voluntary negotiation and good faith.”
For now, the Argentine case is pure uncertainty: if the country will appeal a negative sentence or if it could “dodge” a technical default by changing the jurisdiction of bonds under New York law. Something the IIF doesn’t think would be easy.
El Cronista
Fund that entered the swap demands that Argentina’s obstinancy not be tolerated
It is Greylock, which just published an article in the Financial Times. One of the authors told El Cronista: “Argentina left people like Elliott furious”
Friday, April 5, 2013
LAURA GARCÍA Buenos Aires – Finance Editor
Until now, there has been nothing that disturbs the waters like the predictable. First, Fintech, a fund that accepted the exchange, stood up in the Financial Times for the rights of the bondholders and defended Argentina’s strategy. Then Aurelius, a friend of Elliott and member of the much-maligned vulture fauna, came out to smack it down. But Greylock just shook that logic of lobbies and interests at stake. The fund led by Hans Humes which now holds restructured bonds from Argentina whose payments could be blocked in case of an adverse ruling asked that the “unusually intransigent conduct” of the country not be tolerated.
“There is no evidence that the recent judicial decisions against Argentina, which never made a goodwill offer, will impede future sovereign restructurings. Quite the contrary. Last year, Greece successfully negotiated a voluntary swap with its creditors. This year, Belize reached an accord in principle with its bondholders. No other country acted with the obstinancy of Argentina and the current system of sovereign debt restructuring is working,” says the article.
“If the court vindicates Argentina’s continued intransigence, then other countries will undoubtedly face less credit and higher interest rates, threatening growth and the quality of life. Creditors will be forced to adjust to the risk that other countries will emulate Argentina’s behavior. Far from being a cause for alarm, the rulings are a necessary line in the sand,” they said. And they clarified that if Argentina decided to begin to “heal its self-inflicted wounds, then the main group of beneficiaries would be the Argentine people themselves.”
Humes led the creditor committee that rejected the 2005 swap, and then entered in 2010. Greylock didn’t make any filings in favor of Argentina and distanced itself from funds like Fintech and Gramercy.
El Cronista chatted yesterday with Diego Ferro, of Argentina, a partner at Greylock and co-author of the article. Beyond the validity of the arguments put forth, why ask for punishment for Argentina if it would be to the detriment of their interests as holders of restructured bonds? “The friends of the government are playing a political game. But it’s good to understand it as people that are dedicated to the same business as we are. Our biggest business is credibility before creditors. We don’t sell out for the position we have,” Ferro explained.
“While we are not a big fund, we were, for example, the only American representative on the Greece committee. We also recently participated in the one in Belize. In both cases, they sat down to negotiate in good faith. And there was no vulture fund to whom it occurred to do anything. Argentina, in turn, said this is it. If you want it or not, in a unilateral way. Argentina left people like Elliott furious,” he said.
Of course Ferro dismissed the idea of a dark hand in the credit default swaps market. “Elliott hedged its positions for a long time because it has a big position. It’s the most normal thing in the world. But they want to create a conspiracy.” He agrees that the decision to affect Bank of New York is questionable. “If there is an element that doesn’t unconvinced me it’s that. It affects the whole chain of payments by a judge in New York,” he said. “Today Argentina has three alternative: don’t pay, make a case or find an exotic way to pay by making a statement. The third option is the most likely,” he said.
Greylock’s argument in this “pari passu forum” that the Financial Times has turned into agrees curiously with what Aurelius put forth. There are some mistreatments that you don’t pardon. Even when you have restructured bonds.
Ambito Financiero
Sign: Argentina wins lawsuit against the vultures in France (the U.S. remains)
Friday, April 5, 2013
By Carlos Burgueño
Shortly before knowing the ruling from the appellate court in New York, the government received news that couldn’t be better: Argentina beat vulture fund Elliott in the highest and definitive court of jurisdiction in France in the lawsuit that was filed by them against the country over the default on bonds in euros purchased in November 2001. Yesterday, the Supreme Court of France (Cour de Cassation) ruled that Argentina has the right to restructure its foreign debt and backed the calls to swap warrants in default in 2005 and 2010, and as it is the highest ruling, it closed the case against the country by investor Paul Singer. The court had to rule in the case filed by the fund NML Elliott, property of the American, which sought taxes that French companies located in Argentina paid to be subject to attachment.
The ruling also overturned claims from other vulture funds like Dart and Aurelius, whose cases against Argentina were held up to await yesterday’s decision. It thus closes the European chapter of the long battle against the vulture funds, awaiting what happens in the United States. In total, Argentina managed to avoid a new default in Europe on some US$2 billion, which would have upended an eventual updating of the debt in that region for more than US$10 billion already restructured.
Until yesterday’s ruling – 18 pages long – Argentina had already won in the previous two levels of justice in France. Before the government’s posture had prevailed in three appeals filed by NML Elliot, in the courts of Paris and Versailles, the same courts had also ruled in favor of the country in cases made by local subsidiaries of Total Austral, BNP Paribas and Air France, after the end of convertibility in 2002.
In the case of the plaintiffs in these three companies, the French court accepted that the bond contracts emitted during the 1990s didn’t have reach into tax obligations, by which there are no assets subject to attachment that affect the country. The vulture funds tried to have the French companies pay the money that their Argentine branches would have to pay in taxes. Originally, this case had begun in April 2006, when the Paris courts were stuffed with all the lawsuits against Argentina, by which it is the only case that reached a judgment. Then, Dart and Aurelius were added awaiting a decision that would set jurisprudence.
The decision by the French court comes at no better time: shortly before the Court of Appeals in New York decides the appeal of a case of claims from the vulture funds against the country, after the ruling against it from Judge Thomas Griesa. That judge ruled in favor of the vulture funds and ordered the country to pay US$1.33 billion in cash with the money that the country uses to pay its current account. This judicial decision was blocked then by the appellate court, which then asked the country to make a payment proposal, issued last Friday, and that the court endorsed on Tuesday by sending it to the plaintiffs in search of an opinion that they must express before the 22nd. Between one and three months after, the final ruling will come out. Either party being the loser will try to take the case to the U.S. Supreme Court.
The hottest moment of the case against Argentina in French court came in June 2006, when Elliott managed to attach (together with the French company Sempra Energy, which had its rates pesified after the end of convertibility) the house where San Martín died in Boulogne Sur Mer. On the house, now a museum, there weighed a request of transfer to cover the debt in default. Finally, the French court ruled that “this property is not attachable because it is the historic asset of a country” where a “national hero of the homeland” lived, according to a statement from the lower court judge Boulogne Sur Mer, Dr. Ploux, who finally ordered the cancellation of the mortgage. The Elliott fund had also been the one that managed to attach the Frigate Libertad in 2012 in the Ghanaian port of Tema; an action that was then lifted in December by the international court of the Sea in Hamburg.
In addition to the procedures related to taxes, the courts in Paris already had stayed the attachments placed on bank accounts belonging to the Naval Commission, the Argentine Air Force and the Casa Argentina Foundation and the embassy itself, treating them as diplomatic missions and considering them protected by the Vienna Convention.
An important political note: by closing the case in France, there is no chance of attachments in that country. This means at least Tango 01 can return to fly to Gallic territory.
The Economist
Friday, April 5, 2013
THE dramatic showdown between Argentina and holders of its defaulted debt looked for a moment last week as if it was about to move one step closer to closure. Instead, the legal and financial tangle has become still more confused.
In 2001 the Argentine government reneged on $81 billion of liabilities. It staged two restructurings in 2005 and 2010, in which the owners of 93% of the defaulted debt agreed to exchange their holdings for new securities, at a 65% loss. The other creditors have held out for a better deal, which they hope to get through the courts. On March 29th, following a request by New York’s Second Circuit Court of Appeals, Argentina submitted a filing detailing how it proposed to pay these so-called “hold-outs”, who are suing it for $1.3 billion in principal and past interest. The plaintiff group, which consists of billionaire hedge funds and individual retail-investors, insists that a clause called pari passu (“equal step”) dictates that if Argentina is to continue paying back the bondholders who exchanged their defaulted debt, it must pay back the hold-outs too. Thomas Griesa, a district court judge, endorsed this argument in October. Now it is up to the appellate panel to determine how to fulfill his equal-treatment order.
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