El Cronista
Swap bondholders are proposed to cede US$1 billion to the vulture funds
Economy Ministry is aware of the move, presented as a negotiation between private parties. Opinion grows in the government that the litigation with the holdouts has to close
Tuesday, October 22, 2013
By Esteban Rafele
A group of investment funds with restructured Argentine debt proposed a solution to end once and for all with the lawsuits against the holdouts and asked those who have the country’s bonds to contribute money to a kind of common fund for lifting the lawsuits, take the country out of default and ensure their own deals. They seek to collect US$1 billion in five years to add to the offer of reopening the swap that Argentina made and to satisfy the vulture funds.
The move counts on, at least, the Economy Ministry “letting it happen”, while it did not want to comment. According to what El Cronista could learn from official sources, the view is extending more and more in the government that a definitive end must be brought to the wave of lawsuits.
The newspaper La Nación reported that the investment fund Gramercy has put itself in front of the proposal, which consists of normalized bondholders resigning part of their interest from bonds in favor of NML Capital, the fund of magnate Paul Singer, and the other litigants.
A source who is aware of the negotiations detailed to El Cronista that the proposal aspires to collect US$1 billion in five annual payments of US$200 million. That money would be added to bonds from the reopening of the swap. But it would not only go to Singer, who has a sentence of US$1.5 billion in his favor pending a verdict in the U.S. Supreme Court, but to the universe of bondholders with unpaid warrants. It is calculated that they have US$6 billion in bonds that, with interest and penalties, would be turned into US$17 billion.
The proposal came from an expert in debt restructuring: Jim Millstein. This American was head of the office of restructurings at the Treasury Department of his country until 2009, and then opened his own firm. As an official, he supervised the bailouts of American International Group (AIG) and Citigroup, during the subprime crisis.
This expert convinced the trust of investors led by Gramercy that this would solve the default and lift the price of Argentine bonds, in a manner in which the swap bondholders would recover through gains the US$200 million per year they would have to give up.
According to the theory, Singer would accept a haircut, which would not be very significant, to collect on the bonds he acquired for pennies on the dollar. He knows that Argentina is unlikely to respect a ruling against it in the Supreme Court. NML Elliott let it be known that it is not participating in these negotiations, while Jay Newman, an executive at Elliott, wrote on October 7 an op-ed in the Financial Times newspaper asking that the administration of Cristina Fernández sit down to negotiate.
In this case, it would not be Economy Minister Hernan Lorenzino, the negotiator, but private parties, which would leave the government free of granting differential treatment to the vulture funds. The private parties have to achieve an acceptance of 85% for their proposal from the exchange bondholders. The amount seems utopic, above all because Fintech, one of the big holders of Argentine bonds, wants nothing to do with negotiating with Paul Singer.
Fintech is the investment fund of Mexico’s David Martinez, also a minority shareholder of Cablevision. Martinez has had a personal and judicial battle with Singer. The first originated when the Mexican accepted entering the debt swap of 2005 and isolated Elliott. The second came afterwards, when Martinez sued NML in a case linked to Vitro, the biggest glass manufacturer in Mexico.
El Cronista
Negotiations move forward between restructured bondholders and holdouts
Tuesday, October 22, 2013
Garrido firm attorney Eugenio Bruno, who advises bondholders that entered the swap and is currently negotiating with the holdouts, highlighted that it will not be easy to get all of them to accept selling their bonds in default. “I see it as difficult, it will not be easy. The Elliott fund is not the most complicated, within the holdout community some are more intransigent and also there is not too much to offer,” he said.
Bondholders that entered the swaps of 2005 and 2010 have been negotiating to buy the US$1.333 billion in debt from the vultures because they believe that this would avoid Argentina falling into technical default and would guarantee their payments.
Asked about the timetables by El Cronista, Bruno explained that in these cases, the timetables are long. “There are two stages: one is the negotiation, which nobody knows how long will take and the other is the implementation with the consent of all those that entered the debt swaps so that no other creditor asks for an injunction and for that an assembly is needed 20 days in advance. There are minimum deadlines that have to be honored but it can be done,” Bruno explained.
Clarin
Doubts that the bondholders will give in for the agreement with the vultures
Tuesday, October 22, 2013
by Tomás Canosa
The markets are getting excited over a possible agreement with the holdouts, although they agree that it will be very difficult to convince the majority of the bondholders who did enter the debt swaps to cede a part of their bonds in order to bring an end to the lawsuits with the vulture funds.
Economy Minister Hernán Lorenzino met last week in Washington with investment funds and bankers to hear proposals from a group of Argentine bondholders: they would give up a part of their bonds to the holdouts in exchange for the vultures ending their lawsuit against the country. As Clarin reported on Saturday, the negotiations are advanced, but "there is still no green light from Olivos" and although it is a private agreement, the government has to intervene in the operation.
The markets have already echoed the negotiations, but in the city they are still eager to hear any official confirmation.
Clarin tried to communicate with the Economy Ministry but there they would neither confirm nor deny the information. Barclays Bank yesterday sent a report to its clients which said that a proposal like the one proposed by the bondholders would be "extremely difficult to implement.”
The prospectus that Argentina sent to the U.S. Securities and Exchange Commission (SEC) in 2010 established that the terms of payment and any other modification could be made if approved by 85% of the bondholders who entered the 2005 and 2010 swaps and even has to have a majority representation of holders of different warrants. "If it happens that’s very good," said Alberto Bernal of Bulltick. "I see it as difficult,” said a trader who asked not to be named.
The Elypsis consulting firm, led by Eduardo Levy Yeyati, estimated that the initiative of the “friendly funds” came about because their legal advisers recommended they not accept a change of jurisdiction of bonds because the holdouts could sue them. "The outreach, facilitated by investment funds that entered into the 2005 and 2010 swaps, is seeking a solution in that part of the ´cost´ of agreeing is absorbed by them, in exchange for unblocking a situation that is currently producing a clear drag on the price of the bonds.”
El Cronista
Hiring of an ex-Bush official increases the chances that the U.S. Supreme Court will take the case
The incorporation of the former U.S. Solicitor General, Paul Clement, to the Argentine defense was a recommendation from the bondholders with restructured bonds in euros
Tuesday, October 22, 2013
by MARIANA SHAALO Buenos Aires
The hiring of lawyer, and former Solicitor General of United States, Paul Clement, to be added to the Argentine defense in the lawsuit against the holdouts, is very positive, say analysts and experts who were consulted.
According to sources close to the negotiation, the bondholders with bonds from the swap in euros, the so-called "Euro-bondholders" were those recommended adding Clement to the defense team to increase the chances that the U.S. Supreme Court will take the case.
Clement was Solicitor General of the United States from June 2005 until June 2008 during the George Bush administration. For bondholders that accepted bonds in euros, it was necessary that one person from the defense "has the confidence of the judges of the Supreme Court.”
Although it is not yet known if the bonds in euros from the 2005 and 2010 swaps will be affected in the event that the decision of the Court of Appeals is final and Bank of New York Mellon is obligated to pay the holdouts rather than the restructured creditors, the "Euro-bondholders" don't want to take risks and have asked in different instances of the trial to not end up being involved.
Even before the decision against the Argentina from the Court of Appeals of New York, advised by their legal representative Christopher Clark, they filed a lawsuit in the Commercial Court of Brussels to issue an emergency order to ensure their payments, which was not granted.
"The involvement of Clement is positive because it marks a greater possibility of the Supreme Court asking for the opinion of the Solicitor General and that he will end up recommending the cert petition, which extends the timeline of events," said Sebastian Vargas, of Barclays.
The analyst from the investment bank explained that the request for the opinion of the Solicitor General has a low correlation with the final decision of the Supreme Court but does have to do with the possibility that the case will be takem. "According to empirical data, the Court follows the recommendation of the Solicitor General in taking or rejecting a case 80% of the time," said Vargas.
Economy Minister Hernán Lorenzino met with Clement last week, during his stay in Washington within the framework of the annual meeting of the IMF and the World Bank. The lawyer has a career record of having participated in 41 cases before the highest court of the U.S., 16 of which took place in the past two years. Clement, who will work in conjunction with lawyers from the firm of Cleary Gottlieb Steen & Hamilton, was the name chosen after a selection that included four lawyers of great prestige in Washington, according to what the official Télam news agency specified.
"Given Clement’s experience, we believe that your participation in this stage of the litigation reveals that he considers the likelihood that can do that the Attorney general of the United States is invited to give its opinion and that it recommends to take the case of Argentina is not negligible," said from Barclays.
Meanwhile, for Eugenio Bruno, lawyer and representative of the bondholders that entered the swap, Clement’s entry into the defense team "increases the legal experience and strengthens the defense because he is a former government solicitor and he knows the judges, above all the Republicans.” "He adds the possibility of a dialogue with the members of the Supreme Court, which means they can talk about the case on an informal basis and that wasn’t there before," he added.
El Cronista
Lacking proof to believe there is a new climate
Tuesday, October 22, 2013
by Hernan de Goñi, Assistant News Director
The efforts unfolding among various big holders of Argentine debt to leave aside the heavy sentence set by the New York courts still doesn’t have a horizon that can be called auspicious. But just the existence of these negotiations, in which the government cannot be seen as being involved while following them attentively, reveals that there are signals going off on the economy’s dashboard that have been turned off for a long time.
The government cannot offer the vulture funds more money than the bondholders collected from entering the swaps of 2005 and 2010. But these investors can do it, resigning part of what they receive. The raw material (dollars) would also come from the State’s pockets, but it would all move to find a new avenue, one acceptable for the judges and the K-narrative.
Nobody expected to discuss a proposal like this weeks ago, when Cristina Kirchner was still brandishing her usual criticisms of the vulture funds. The same is happening with the pact in the ICSID to unblock funds from the World Bank. The BCRA also will contribute to this new climate, cushioning the loss in reserves with short-term credits. Nobody expects the government to show conviction with this shift. Many, also, prefer to wait until November before beginning to believe in it.
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