Singer Effect Waning in Defaulted Bond Market: Argentina Credit

 

Bloomberg

Singer Effect Waning in Defaulted Bond Market: Argentina Credit

 

Wednesday, July 10, 2013

 

By Katia Porzecanski

 

July 10 (Bloomberg) -- The market for Argentina’s defaulted debt is drying up as speculation that the government plans a third bond swap fades and the country’s legal battle with holdout creditors from its 2001 default goes unresolved.

 

Dollar-denominated securities left over from the nation’s $95 billion default have dropped about 7.5 cents on the dollar since April to a mid-price of about 40 cents, according to prices compiled by Seaport Group LLC. Trading in the defaulted bonds is down as much as 50 percent from three months ago, according to Torino Capital LLC. Notes issued in the country’s 2005 and 2010 debt restructurings have lost 2.3 percent since the end of April while emerging-market bonds dropped 9 percent on average, according to JPMorgan Chase & Co.

 

 

La Nacion

The government bets on the U.S. Supreme Court

 

Thursday, July 11, 2013

 

By Martin Kanenguiser

 

The government is betting that the U.S. Supreme Court will take the case against the bondholders in default, on the basis that there is systemic risk and that the ruling of the court of appeals, in the facts, constitutes an attachment for the country.

 

Economy Minister Hernan Lorenzino said yesterday afternoon in comments to journalists at the Palacio de Hacienda that “if the Supreme Court sides with us in the pari passu question, the whole case of the bondholders falls.”  According to the controversial interpretation of the rulings of 2012 in the District and Appeals courts, the judiciary ordered that the bondholders in default be treated in the same terms as the creditors that entered the swaps in 2005 and 2010.

 

The official bet is that the highest court of the U.S. will take the case before the court of appeals issues its ruling about the responsibility of the payment agents (basically the Bank of New York) and the form of payment (after Judge Thomas Griesa ordered that it has to be 100% in cash).  The other key is whether or not the stay is maintained while the Supreme Court analyzes taking the case, which could be decided in October.  “There are two possible scenarios: either the appeals court rules before July 31 or waits until the Supreme Court decides on the underlying issue and, on the basis of what the justices of the high court decide, acts,” said a high level source at the Palacio de Hacienda. While several attorneys believe it is unlikely that the U.S. Supreme Court will analyze the Argentine case (it but consider that there is a violation of federal law or a public interest), the Economy Ministry believes that there are chances it will for two reasons:

 

Violation of the law of sovereign immunity (FSIA) because the U.S. judges are deciding with an extraterritorial criteria by impeding Argentina to make a payment in Buenos Aires to the Bank of New York (Bony) for that entity to send it to the bondholders in New York.

 

The existence of a systemic risk by siding with a minority that didn’t accept the swaps, in the face of other sovereign restructurings.  However, the judges have already said that the Argentine case is unique and that other countries protected themselves by designing their swaps to not have the same legal problem.

 

The director of the consulting firm ACM, Maximiliano Castillo, said to LA NACION that “an adverse ruling from the court of appeals of New York, which includes BoNY, will generate important difficulties for adequately channeling debt services on debt in regular status with foreign law.”  The government must pay bonds with New York law – subject to greater risk of attachment – with US$224 million this year and US$669 million next year.

 

Ruling against the vultures

 

Meanwhile, the government achieved success in Belgium, where the court of appeals ordered the lifting of the attachment on a diplomatic account requested by the vulture fund NML-Elliott.  Economy affirmed that, while there is an appeal, “this will not have an stay effect, by which the accounts from the attachment will have to remain unfrozen.”

 

 

El Cronista

For the government, the fight with the vultures will not affect debt payments this year

The Executive believes that it will be able to pay the US$270 million in bonds with New York law that are left to be paid.  Appeals ruling against it on Tuesday “has no influence,” said Lorenzino.  

 

Thursday, July 11, 2013

 

ESTEBAN RAFELE Buenos Aires

 

The government is betting that the judicial case that was initiated by the holders of debt bonds in default in the United States will go on, at least, until the end of the year.  If that occurs, it will allow for the uninterrupted payments of US$270 million on public warrants with New York legislation that run the risk of attachment by decision of District Judge Thomas Griesa.

 

According to an important official source that closely follows the case, the succession of recourses of appeals that are left for Argentina in case of it facing an unfavorable sentence from the Court of Appeals for the Second Circuit in New York will allow the government to deal with the payments left for this year with New York legislation.  On September 30, the country has to make a payment on the Par bond for US$70 million.  On December 31 it will have to settle commitments corresponding to the Discount for US$200 million.

 

The most onerous payments occurred in the first half of the year, while a stay is still in force in favor of the country.

 

On Tuesday, a decision of the Court of Appeals kicked a hornet’s nest.  The appeals court rejected a series of twelve appeals the country made on different occasions in the long judicial process that is being wages by the funds NML Capital, of Elliot (property of  magnate Paul Singer) and EM, of Kenneth Dart.  According to what the Economy Ministry and attorneys agreed who closely follow the process, the court “cleaned up the docket” on smaller issues, but didn’t rule on the underlying question nor gave indications of how or when it will rule.  Strictly speaking, it was an administrative decision by the Court secretary and not by the court itself.  According to Economy Minister Hernan Lorenzino “has no influence” in the case.

 

In the underlying case, Judge Griesa ordered Argentina to pay US$1.33 billion to the holdouts.  He found that the country violated the pari passu clause or equal treatment towards those who hold bonds in default by paying services to those who restructured their debt.  Griesa, also, obliged Bank of New York (BONY), the trustee, by not making regularized payments while it doesn’t settle the sentence.

 

Argentina appealed that ruling and the Court of Appeals cited the parties on February 27.  Vice President Amado Boudou, Lorenzino, and Finance Secretary Adrian Cosentino, among others, traveled that day to New York.  The court upheld the violation of the pari passu clause but, according to the government, didn’t rule about how nor how much Argentina must pay.  The country understood that “equal treatment” would be to pay the same that was offered in the swap and made that proposal.

 

The country now has two steps left.  On one hand, on June 27 it appealed to the Supreme Court on a previous sentence from the Court of Appeals that upheld pari passu.  According to experts in the case, just in October the high court will decide if it accepts the case and when it will take it up.  But also, if the appellate court upholds Griesa’s sentence to pay, the country will ask for a new stay, and will again go to the Supreme Court.

 

The government understands that Griesa violated the Federal Sovereign Immunities Act by trying to attach payments that are made in Argentina, in the account of BONY in the Central Bank.  Thus, the Executive will but time.

 

 

Ambito Financiero

Lorenzino: “Nothing has changed” for the country

 

Thursday, July 11, 2013

 

Minister Hernán Lorenzino assured yesteray that “nothing has changed” for Argentina with the ruling from the Court of Appeals in New York on the litigation between the national government and the vulture funds.  “There was no decision from the judges, it was only an administrative question,” argued the official.

 

He clarified that the ruling of that American court “simply says that as the underyling question is before the court, all the appeals were set down.  So, it’s a strictly administrative issue, a wrapping up of the case, which doesn’t change anything about the situation.”

 

With these statements, the head of the Palacio de Hacienda denied that the New York court had rejected the appeals filed by the national state to avoid compliance with the ruling from Judge Thomas Griesa on October 26, 2012, which orders the country to pay the vulture funds 100% of the bonds of Argentine debt that remain in default.

 

At that time, the court had upheld a sentence from Griesa in favor of the bondholders that didn’t enter the debt swaps of 2005 and 2010 put forth by Argentina, and that hold warrants in default for some US$6 billion Lorenzino said that “nothing has changed” in the judicial conflict between Argentina and the vulture funds, and pointed out that the case is running by two “independent processes.”

 

"The underlying issue is if the pari passu clause has been violated and the second is how that violation must be remedied,” said the minister.  Consequently, he said that “Argentina’s appeals remain in place” before the Court of Appeals for the Second Circuit in New York, where the Casa Rosada is bringing forth a case against the vulture funds.  The government of Cristina Kirchner could offer those bondholders the reopening of the debt swap, once the definitive ruling from the American court is known about this question.

 

 

Telam

Belgian court rules in favor of Argentina and against the vulture funds

 

Thursday, July 11, 2013

 

The Court of Appeals of Brussels issued a sentence in favor of Argentina by ordering the lifting of an attachment that was held on the country’s diplomatic accounts, in a case filed by Paul Singer.

 

The judicial decision is dated June 28 and was announced today to Argentine authorities, the Economy Ministry reported this afternoon (Wednesday).

 

The Belgian Court of Appeals applied the reasoning of the ruling of the Supreme Court of that country on November 22 last year and this way upheld that bank accounts for diplomatic use have “special immunity” that can only be renounced through an express and specific pronouncement.

 

This pronouncement reaffirms the posture of the Argentine defense, they said in the Palacio de Hacienda.

 

The Belgian Court of Appeals also recalled the arguments developed by Argentina against the position from NML that the lifting of the attachment “would mean a violation of its rights” under the European Convention on Human Rights (ECHR), and as such dismissed NML’s position, finding that the vulture fund has obtained numerous attachments against the Republic and has alternative means to protect its rights under the ECHR.

 

Therefore the European court found that the acknowledgement of Argentina’s sovereign immunity in this case is consistent with international public law.

 

In consequence of that, the Court of Appeals ordered the lifting of the attachment that was on accounts of the Argentine mission to the European Union and the Argentine embassy in Belgium.

 

An appeal by NML will not in principle have a stay, as the bank accounts subject to the attachment will have to remain unfrozen, official sources said.