Noteholders of trade: in case of default, in Buenos Aires cóbrese
04/03/13 00:00
Unveiled mysterious formula, two things became clear. First, that there was nothing mysterious. After much speculation and various calculations on possible deals (which might please the palate of the Court without Local indigestion), the proposed payment Argentina vulture funds did not move one iota of what is offered on the last trade.
Two arguments gave support to this position: first, the clause RUFO (Rights Upon Future Offers), which would require to extend to the rest of the bondholders of the exchange and that overcomes any offer expires only in December 2014, and on the other , the legal argument itself is sought equal treatment claim in the case.Moreover, as we remarked Barclays These days, the economic distance between Grisea order and conditions of the latest restructuring is so abysmal that any marginal increase in the value of the offer hardly have improved the attractiveness of the proposal in the eyes of panel judges.
Second, although the market reacted with a greater punishment Argentine assets and heightened expectation of default, the statements by Vice President Amado Boudou, insisting they would be paid to bondholders beyond what Justice says, put a flat to falling. And basically make it clear again that the government is willing to seek the necessary mechanisms to prevent blockage of these expenditures. That is, the famous re-routing of payments speaks again today worldwide.
Of course, it is a Plan B. Before we get to that level, there are several key points to define. For starters, the question of the Bank of New York. If the Bank of New York is not reached by the injunction, the possibility of a default evaporates because there was no way to enforce the order to pay. But the bulk of analysts believe it will not be the case. ?? Our base case is that both the Bank of New York as depositary agencies will be reached, but not necessarily clearing agencies??, Say at Citi. Now, if the depositary (Cede & Co.) remain excepted, they speculate, would be the possibility that Argentina send funds directly there, something which, although permitted, would alter the payment mechanism had been used.
It also remains to be seen whether the bondholders with euro denominated debt are also included in the judgment, since their titles are governed by the laws of the UK and the payment will never enter the United States and therefore fall outside the jurisdiction of the Court. In the pending list must be added two other issues that make the legal process and also mark the times of the last act of the holdout saga. If the ruling is adverse to Argentina and requests a review by the Supreme Court, is extend the call?? Stay??, Which remains suspended the effects of failure Grisea and avoids, at least temporarily, the default ? In the market, the consensus is that you should not refuse that request. And another question: you will be asked to Argentina a deposit of $ s 1,330 million as collateral? And finally, take the case accepted? According to experts, the odds are more than modest. If the worst happens , then, if everything went wrong, what Argentina can do to ensure continuity of payments to creditors who accepted the exchange? ?? Hope the Argentina try to find a way to meet that debt, perhaps through a bond exchange with foreign law or local law changing the paying agent and the location??, Say at Credit Suisse.?? Could be a complicated and disruptive, while concerns risk being in contempt of the Court to attend the Argentina may limit participation bondholders base?? They say. ?? But the economic impact would be limited given the isolation of Argentina international capital markets and the low level of foreign investment.??
After his last visit to Argentina, people's Bank of America also attacked the theme? Discuss the feasibility of an exchange to local debt in the event that all legal avenues are closed for Argentina.
Found something more skepticism about the chances of implementation in relation to previous trips but the consensus still seems to be that Argentina could find a way to keep paying the debt. Usually local view is that can be implemented from the operational standpoint, but take several months. The main uncertainty is legal, because if the fault reaches payment intermediaries may be more difficult to implement. The consensus is that not offer anything better than last restructuring and that the cost of an exchange of this type would be small, say 1% of GDP??.
Stuart Culverhouse, chief of research at Exotix in London, has his reservations about the viability of this strategy.?? For starters, change the terms of payment and jurisdiction itself constitute a default??, Clarifies. ?? Addition, local law bonds are not an attractive proposition. In fact, one would be giving up some of their rights as bondholder since New York law, so far at least, is considered the gold standard in regard to creditor protection??.Local bonds are also capable of maneuvering as dollarization, a ghost still lurks. And an exchange of this type could also engender a new breed of holdouts: those who resist the change of venue.
From JPMorgan also hope that Argentina try to redirect their external bond payments. ?? But it is a complicated issue because the Court order that warns intermediaries to assist Argentina in this process. True, one can interpret as acknowledged at the hearing on February 27, that nothing prevents the bondholders, as owners, find a way to cash elsewhere. This might be feasible if one assumes that the vote to change the terms of the contract reaches a most imposing above the rest of the holders. But we think this could still face difficulties while intermediaries are affected by the ban to offer help??.
David Martinez, head of Fintech, who accepted the exchange fund, discreetly supports the same idea. ? Bondholders in the U.S. can not do anything, can not defy the law??, It saves. ?? But Argentina can rely on a change of venue or debtor to avoid falling into this trap. You can solve the technical default. Not the end of the world?, Relativized.
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