Lead Articles:
Ambito Financiero: “The reopening of the swap will not have a closing date”
Clarin: “The vultures threaten lawsuits against bondholders that accept the new swap”
La Nacion: “Investors believe that the change of payment location for debt bonds will fail”
La Nacion: “Wall Street doubts the feasibility of the Argentine proposal”
La Nacion: “Doubts in U.S. over new offer”
Ambito Financiero
The reopening of the swap will not have a closing date
Wednesday, August 28, 2013
By Carlos Burgueño
The third debt swap that the government has put forth on the debt which fell into default in 2001 will remain open for an indeterminant time. Nor will there be a lock law. According to the view of the Economy Ministry, the call to the holdouts to normalie the situation will continue open "sine die" or at least until December 2015 while Cristina de Kirchner is in government.
The intention of the Executive is that beginning with its approval in Congress, the third call will be rapidly authorized, in the same conditions of 2010. According to technical staff that advise Minister Hernan Lorenzino and Finance Secretary Adrian Cosentino, the regime could be given rulemaking by the end of September and be at the disposition of the head of state to dictate the exact moment in which the process will begin. The intention, obviously, is that it be functioning before October 27.
Anyway, the deadline is before February of next year, when, it is supposed, the U.S. Supreme Court will be at the point of declaring if it will take the case or not on the lawsuit Argentina has had against the vulture funds for more than 10 years. The opinion at Economy is that the court should consider as a gesture of good will both the reopening of the exchange as well as the holding open of the time rule.
According to the schedule that officialdom has in mind, after the Court eventually decides to take the case as one of the approximately 30 cases it must decide, a lapse of time will open for different directly involved parties to be called to file statements and the possible amicus curiae that support them. The timing could extend well into 2015, before the court announces a ruling. Between March and mid-2015 there could be circulating by the Court the vulture funds and Bank of New York Mellon (BONY), the main plaintiffs and defendants. But there will also be calls or requests for the filing of the U.S. government,
Argentina’s new defense strategy, will will continue under the representation of the firm Cleary, Gottlieb, Steen & Hamilton (CGS&H), is, in addition to remaining with the third swap process open, to point to the political opinion of the members of the Supreme Court to take more into account (in comparison to the lower courts) the systemic risks that a permanent ruling against the country would have. According to the conversation that Economy has had in recent hours with Johnathan Blackman (from the firm CGS&H), it’s likely that the members of the Court will take into account considerations about the consequences in the rest of the processes of debt restructuring in the world, more if this position is explained also by the administration of Barack Obama and the director general of the IMF, Christine Lagarde. For Argentina’s part, both in the court of Judge Thomas Griesa as well as the Court of Appeals of New York, it was always important to consider the economic commercial question that pointed to Argentina not having honored contracts signed and not paying 100% of its debt issued before December 2001. Following this line, the Court could head other more political arguments that the two lower courts rejected.
In total, and while there is no exact calculation, still outside the restructuring process would remain some US$11 billion, including principal and interest. Of this money, for Economy it will be impossible to convince the equivalent of some US$5 billion of that amount. It is fundamentally the vulture funds, who have shown up by first and last name in the courts of New York like NML Elliot of Paul Singer, Olifant, Aurelius, Blue Angel and Master. Added also are the 12 private individuals who are accompanying the complaints of those funds before American courts, and another US$2 billion in possession of other vultures and holdouts that also filed suit in different courts, but have not made progress like the others. There is then som US$2 billion outside of court registry, which will be in the hands of other vulture funds like the one managed by Kenneth Dart, and who are awaiting the resultion of the American courts before appearing before Griesa.
On the other side, from Economy it is being thought that beyond what happens over time with the case in the Supreme Court (only if it accepts it), trust cannot be placed in the clause issued for the bonds that entered the two previous exchanges, and which indicates that any complaint over the haircut applied will expir in December 2014. According to the ministry led by Lorenzino, the legality of that clause before American courts would not be so firm. In any case, they believe at the Palacio de Hacienda, there will not be speculation about this point because “this government will never pay the vulture funds.”
Clarin
The vultures threaten lawsuits against bondholders that accept the new swap
They say the Argentine proposal violates U.S. law. The other holders also put forth doubts.
Friday, August 28, 2013
by Ana Baron
Washington Correspondent –The vulture funds will reject the plan for the reopening of the swap that was offered to them by Cristina Kirchner on Monday if the terms are equal to those of 2010. And they will sue every bondholder that changes restructured bonds issued under New York law for bonds with Argentine law.
According to what Clarin could confirm, attorneys for NML believe that would the proposal to issue bonds under Argentine law, Argentina is already violating U.S. law.
In fact, they say, the ruling of the Court of Appeals obliges Argentina to pay the vulture funds 100% of what is owed them at the same time it pays the restructured bondholders. If this ruling is not reversed by the Supreme Court, for NML any attempt to change the U.S. bonds for Argentine ones will be “an accomplice to Argentine contempt of court.” “NML will file suits,” said a source with access to the attorneys from that fund.
More still, NML believes that to propose a change of bonds, the President increased the chances that the Court of Appeals of New York will lift the stay that has left the instrumentation of its ruling suspended. “This evidently would be catastrophic for Argentina. For that, NML believes that Cristina’s announcement was uniquely directed toward domestic politics. They say that after the setback she suffered in the Court of Appeals, the President wanted to counter-attack to not appear defeated in the middle of an electoral campaign,” the same source said.
Diego Ferro, of Greylock Capital, says however that NML is exaggerating to scare the restructured bondholders.
“It will not end up being too easy to sue the bondholers that voluntarily accept the change of jurisdiction,” Ferro told Clarin.
“We sold the majority of the Argentine bonds that we had,” Ferro added. “But we are on alert because if the debt swap on bonds takes place, there will very probably be a new deal. Without a doubt the price of bonds issued under U.S. law will go down with respect to the new bonds issued under Argentine law. It will then be the time to buy U.S. bonds. Argentina always offers business opportunities but for the wrong reasons.”
Fintech, one of the funds that holds restructured bonds, already announced it will accept changing them for bonds issued under Argentine jurisdiction. But on Wall Street, the opinion of David Martínez, its director, doesn’t represent the majority. “We all know that Martínez has other business in Argentina by which it is convenient for him to have good relations with the government,” said a source that asked not to be identified.
In fact, other holders of restructured bonds, like Constellation Capital, will not accep the bond exchange.
“Why are we ging to change our bonds that are protected by U.S. law for bonds under Argentine law when the country changes the rules of the game all the time?” said Shahriar Shahida, of Constellation Capital, an investment fund that has restructured bonds.
Shahida doesn’t understand why President Kirchner made this announcement now and didn’t wait for the Supreme Court to move on the case. “It’s a terrible signal. Announcing that they already have a plan to dodge this kind of ruling when it was they who accepted issuing the bonds under U.S. law. This is arrogance or stupidity, or both at the same time,” said the financier.
Shahida said that Argentina will have to give incentives for the restructured bondholders to accept. “On the contrary I believe that no one will accept this. We are long-term investors and for that reason we can wait because in the end, one way or another Argentina will have to face this problem.” “Nobody that is serious will renounce New York protection for Argentine law,” said Jorge Piedrahita, director of Torino Capital LLC in New York. “It will be very easy for NML to attach the payments and that means it ill be risky to take money out of Argentina,” the financier added.
La Nacion
Investors believe that the change of payment location for debt bonds will fail
Friday, August 28, 2013
by Martín Kanenguiser | LA NACION
The creditors that entered the debt swaps of 2005 and 2010 believe that the idea of the government to change the place of payment of those bonds will fail and could bring the U.S. judiciary to life the stay on the ruling in favor of the holdouts.
So said to LA NACION in Buenos Aires and Nueva York various private legal and financial representatives that participated in the sovereign restructurings to exit the default.
In this direction, sources linked to the plaintiffs let it be known that they will go in the coming days to the Court of Appeals in New York to ask it to life the stay on the ruling, due to the intention of Argentina to “disobey” the execution of the sentence.
On the other side, the bondholders that entered the previous swaps believe that, with the third exchange, other funds with bonds in default (Fidelity, Gramercy, Greylock and Fintech, among others) could be added.
However, they clarified that this voluntary operation will not solve the problem that Argentina faces in American court, which ordered it to pay a group of vulture funds and small investors 100% of what they demand, some US$1.33 billion.
All the investors expressed their surprise over the timing chosen by President Cristina Kirchner to make the announcement two days ago, indicating that it put the benefit of the stay at risk, when the U.S. Supreme Court still has not decided if it will take the case or not, something that, the plaintiffs say, will happen between September and October.
Diego Ferro, co-director of the investment fund Greylock, said to LA NACION that “the change in jurisdiction was predictable and it isn’t clear to me how much acceptance it will have; it will not stave off Argentina entering into default if, in some manner, the Bank of New York retains payments".
"It’s a band aid to kick the underlying problem forward. It will have some success, but only partially and in the short term,” he added.
Pablo Giancaterino, attorney for the small Argentine bondholders, said that there will be few who want to change place and law of payment because “the risk of pesification is very big and legal security is low.”
In that same tune, Horacio Vázquez, of the Association of Those Harmed by the Pesification and the Default (ADAPD), said to LA NACION that “it is a very big risk to bring cash to Argentina unless its exit is guaranteed, and that certainty only is for the big investors who have business with the government.”
Two sources at Wall Street funds affirmed that the offer to change the payment location “could be interpreted as a disobedience of the Court of Appeals, which could lift the stay.” This would mean, for example, that the government could not work with its attorneys or payment agents to change the domicile to pay.
This negative perception was upheld by Ferro: while Argentina presents these initiatives as a sign of good will, the judges “could take it as a move to evade the sentence” from last Friday.
"Accomplices”
An Argentine economist with excellent dialogue with the financial system went a step further. “The investment funds are not going to be able to change their bonds with foreign law for others with national law because they could be considered accomplices of Argentina,” he warned, after speaking to attorneys for Wall Street banks.
ATFA, which is made up of vulture funds, already anticipated its opposition to the plan, announcing a teleconference today entitled “The ramifications of Argentina’s plan to evade its debt”.
In relation to the second reopening of the swap for bondholders in default – which will remain open without a predetermined deadline, according to sources from the Economy Ministry - Giancaterino said that "Gramercy and Fintech, which have a majority of the bonds in some series, will enter for their agreements with the government, so for them it will be a success.” What will not happen, he said, is that “small holders will enter.”
Vázquez said: “If the small holders already put up with 12 years, we can put up with another two until the government changes.” As such, Ferro said that “the reopening of the swap interests us and seems reasonable to us, while it does not solve the underlying problem, which are the sentences in favor of Elliott.”
The director of the fund that handles investments for Argentines abroad said that “the swap in itself cannot be read as a disobedience of the Court of Appeals, while it remains to be seen what happens when the bondholders that entered the swaps are paid and not the holdouts.”
More bluntly, the executive of a Wall Street bank indicated that “few will want to enter the swap, because the risk of default, not or in six months, is high, so it’s better to wait to sue.” About the motives from the government to make the announcement now, he said that “they prefer to bet on a partial default and count on more resources in the face of the October elections.”
La Nacion
Wall Street doubts the feasibility of the Argentine proposal
The question is if the country is disobeying the U.S. judiciary with the offer
Friday, August 28, 2013
by Florencia Donovan | LA NACION
Argentina’s proposal to reopen the swap and change the jurisdiction of the restructured bonds to counter an imminent defeat in American courts in the lawsuit for the debt in default was received on Wall Street with clear suspicion. While many analysts value the pragmatism that, this time, they say, the government showed, they anticipate that it will not be easy to bring the proposal into practice, above all the attempt to change the place of bond payments.
"The big question goes to the risk that exists in the execution (of the plan) and if the bondholders will participate or not,” said Siobhan Morden, chief strategist for Latin America at Jefferies. In fact, a point that on Wall Street was a matter of debate yesterday was if Argentina was already disobeying American courts or not simply by offering a change of jurisdiction of bonds.
According to what Antonia Stolper explained, who is a partner and Latin America lead for Shearman & Sterling, a New York law firm, last November Judge Thomas Griesa had already waned Argentina that it should not try to modify the place of payment of the bonds. “What is not clear is if the stay on the sentence from the Court of Appeals overs everything, or if this order from Griesa is in force,” Stopler said. “It wouldn’t surprise me that some holdout asks the Court to clarify it,” she said.
It’s not a small detail, now that if Argentina was already disobeying the American judiciary, according to analysts the execution of the change of jurisdiction of bonds would be complicated. On one side, because some American funds or investors won’t want to participate in an operation looked poorly upon by the courts of their country, and could mean future contingencies. On the other, because it would also constrain the secondary market of the new bonds with Argentine legislation and, as such, would make the bonds less attractive to international investors.
"Intermediaries like Euroclear, DTC or Clearstream will have to be very careful in accepting the custody of these bonds if Argentina ends up disobeying the American courts. In such cash, a big unknown is which secondary market will have the new bond,” said Daniel Chodos, emerging markets strategist for Credit Suisse.
Currently, local law bonds, among them the Boden or Bonar, are attractive because, as they are not bonds that came out of the debt swap, are not affected by the sentence from the Court of Appeals. So, they can be traded without problems in places like Euroclear, which allows international investors to maintain their holdings abroad. IF the new bonds fall outside the circuit of international compensators, investors will be obliged to trade in the local market.
"The offer has positive aspects, but there is uncertainty with respect to the feasibility of the swap of international bonds for local warrants,” agreed Sebastián Vargas, chief economist for Latin America at Barclays. “A bond needs to be liquid and transferable. For investors it’s a recurring question at this moment: what happens if this swap is not feasible? What will Argentina’s position be?”, he said.
Some entities, like JP Morgan, evaluate the Argentine offer as “under pressure.”
"To give indications that Argentina plans to ignore an effective order from the Court (by the one from Griesa to not change the place of payment), unfortunately, (Cristina) Kirchner could be inviting the holdouts to ask the Court to lift the stay of execution on the ruling, which would provoke a bad predisposition from the Supreme Court before it makes a decision (on if it accepts the Argentine case or not),” said JP Morgan economist Vladimir Werning in a report.
On Wall Street they also warned that to be in contempt of Griesa’s order could harm the financing of companies like YPF which are property of the State today.
La Nacion
Doubts in U.S. over new offer
Analysts criticize the idea of evading that country’s courts with a change of jurisdiction
Friday, August 28, 2013
by Silvia Pisani | LA NACION
WASHINGTON.- Among enormous doubts and warnings about “possible harm” to the official aspiration to reach the U.S. Supreme Court, the Argentine government’s announcement to open the third debt swap and to change jurisdiction to Argentina on restructure bonds that are being paid in New York, to avoid the risk of possible attachments, was received in local circles.
But only 24 hours after the official announcement, one of the facts that drew attention was the absence of the bill that President Cristina Kirchner promised to send yesterday afternoon.
"We started badly, one can understand it, but on an issue like this it’s certainly sloppy", said Charles Traymon, economist from University of Chicago, in a dialogue with LA NACION.
Possibly a consequence of that is the notable silence among the main actors of the lawsuit. There were no official reactions among the plaintiff funds suing Argentina – NML and Aurelius – nor among the so-called “affected third parties”, made up of different groups of holders of restructured bonds that could see themselves affected by an adverse outcome.
"We have to wait and see what Argentina will really propose. But one of the problems that it will have will be to convince investors that it have said no twice before. There will be some who accept, but others will insist on refusing,” Traymon predicted.
"I don’t believe it will succeed. On the contrary, I believe that it will activate a counter-attack by the plaintiffs to ask the American judiciary for an order to impede Argentina to alter the pre-established conditions of payment,” said Arturo Porzecanski, of The American University, located in this city.
While they have not spoken out in an official manner, bondholders who already swapped expressed confusion on the idea of modifying the jurisdiction of their holdings from New York to Argentina.
"It is not a country whose position before the law engenders much confidence,” was one of the arguments.
Appeal to God
One of the points that drew attention was the appeal by the President that “God illuminate the U.S. Supreme Court,” the court before which the government trusts in being able to bring the case.
On the legal cost, Bruce Wolfson, of Bingham McCutchen, said, however, that legislation to evade the American courts won’t help the American government to intercede in favor of Argentina” before that highest court.
There was, however, a rescue from the idea of “a message reaching the world that it wants to pay the debt,” included in the presidential speech. “What is left is to see how that is implemented,” something that yesterday, with the absence of the promised proposal, couldn’t be completely evaluated. “If it is something inside of the already-known terms, it won’t work,” was the message.
The President had said that the new offer destined to the 7% that didn’t enter the previous exchanges would have the same conditions as the operation in 2010.
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