Infobae
The financier most listened to by Nestor Kirchner seeks to convince the holdouts
He is the owner of Gramercy, a fund that played in Argentina’s favor in 2010 and contributed US$3 billion to the swap. Now it’s behind the plan for the bondholders to cede part of their gains to the holdouts. The negotiations have just gotten moving
Wednesday, October 23, 2013
By Leandro Gabin
Time has passed but the government’s “friends” in the battle against the holdouts continue to be the same people. The new plan circulating to resolve the debt in default has a key proponent: Robert S. Koenigsberger. He is the owner of Gramercy, a risk fund that in 2010 contributed US$3 billion to the reopening of the debt swap. He was the first to give his consent to that operation at the hands of Arcadia (judicially tarnished for influence trafficking and linked to Amado Boudou), which set off another wave of acceptance that managed to save an operation that ran into trouble. “He’s one of the few financiers from abroad that was listened to by Nestor Kirchner,” said various sources.
But this American who is less than 50 years old, a tireless defender of Argentina in the courts (he filed various briefs in Argentina’s favor, known as amicus curiae), is who now has the task to sound out a plan for avoiding a new default for the country. Gramercy and other funds, joined by a consortium of lawyers, are pushing an agreement between the 93% of the bondholders that accepted the debt restructurings (2005 and 2010) and the so-called vulture funds led by Paul Singer’s Elliott Management.
The idea would be that those bondholders that took the swaps accept ceding part of the future payments (for the next 5 years) on their bonds in benefit of the vulture funds. The theory is that, since the government cannot improve the offer to the holdouts, the creditors be the ones who become a kind of “cash cow” to buy the lawsuit of Elliott and Aurelius. To pay the funds to give up continued litigation and eventually condemn the country to another default would cost some US$1 billion or less.
But the accounting that aides make is that it will have to go up to US$10 billion if they want to end with all the litigation. It happens that of the 7% of the debt still in default, 5% are awaiting or have a sentence in their favor in New York and only 2% represent the vulture funds that are even closer.
If the government wanted to avoid these other bondholders executing sentences after the Elliott saga ends, they have to pay all of them (or the full 7% that is left). Of those bondholders that are still not publicly known, there is US$2 billion in the hands of Italian investors with rulings in their favor in Manhattan. They lost in Italian courts but continue with a case in the ICSID (World Bank tribunal), which took it due to a treaty between the two countries, and it ended up in the courtroom of Thomas Griesa who put it on course.
For that, what is being recommended to the government would therefore be that the plan that would finally be put into operation (there is still no reply nor an approach from Hernán Lorenzino to all of this) attempt to add the largest quantity of holdouts. Otherwise, the government would be only buying time.
Whatever it would be, the strategy that the “friends” of the government launched to convince their peers to give up profits to pay the vultures (and consequently take away the risk of a default on the debt), has a standard bearer.
Koenigsberger sent an Argentine economist, Gustavo Ferraro, to begin the negotiations with the rest of the funds. Ferraro knows them well since he worked at Barclays Capital in 2010 for the government, when they worked on the reopening of the swap.
In that same year, the owner of Gramercy boasted of having a direct line in to Néstor Kirchner. The former President was the one who decided the conditions of the swap, or whether the offer was going to be more or less beneficial for the holdouts. At that point, Koenigsberger had a fight with Kirchner when the former president took away certain attractions from the offer. "That is not what we had talked about. I’m telling you, this is not the way it is,” the financier said to a person who had to repeat it verbatim to the former president.
According to those close to those negotiations, the owner of Gramercy was heard and taken into account by Néstor Kirchner when it came down settling the minor issues of the offer. "He was a leader for whom he (Kirchner) had respect. He knew that the swap was in play over whether his fund accepted it or not," a participant in these operations said. The contact was not in person but through emissaries from both sides.
Now, Koenigsberger’s representative is the one who is promoting the approach with other bondholders to avoid a default. The needs of Gramercy to step into this are specific. The fund has a lot of investments in Argentina, in bonds, and recently bought part of the claims that the country faced in the ICSID, according to what Clarin reported.
"They are funds long associated with the government. It doesn’t surprise me that they are behind this. But the reality is that for the other creditors, an operation like this is almost impracticable,” said other funds that recently exchanged their debt in default in 2010. There are more than 200 funds that will have to agree to give up money in favor of the vultures so that the initiative is successful.
With a very low profile, Koenigsberger usually comes to Buenos Aires from time to time but completely avoids places where he can be recognized. "He knows that in Argentina the media can photograph him and that is not exactly what he wants," said a banker who has been with the strongman of Gramercy on several occasions. He met with officials at his hotel and handled everything in great secrecy. It is on him, in the end, that the government’s hopes are deposited.
Ambito Financiero
WB proposed an “alliance” for Argentina to return to the markets
• It speaks also of an “inevitable default, but not immediate” over the lawsuit against the vultures
Wednesday, October 23, 2013
by: Carlos Burgueño
The World Bank proposed in September a “Country Partnership Strategy” (CPS) for Argentina to be able to return to the international financial markets. It was during a meeting of the IMF board in preparation for the annual joint meeting of the entities on October 10, in which there was talk of an alliance in favor of Argentina so it could return slowly to the international financial markets.
The entity led by Korean-American Jim Yong-Kim said in that meeting in Washington that Canada was one of the countries that consulted about this option, against a negative background that the country faces over the bad news in the U.S. courts and the rulings against Argentina in the lawsuit against the vulture funds.
The key facts came out of a routine internal paper from the Paris Club distributed inside the organization last week, where it also says that that for the country “a new default is almost inevitable, but not immediate.”
What concerns the organization and was exposed in the text that this newspaper obtained is the possibility of resuming negotiations with Argentina to seriously begin discussion (or resume those that were closed in 2011) with the group of creditors countries linked to the Paris Club, to which (without counting interest) Argentina owes some US$6.75 billion. In May 2011, when Amado Boudou was still Economy Minister, the Paris Club refused any payment plan if Argentina would not first agree to a review set forth in Article IV of the IMF charter, a position that the government of Cristina de Kirchner politically rejected.
The international financial crisis and the run on the currency after the elections of October 2011 closed any possibility of progress in the discussions.
What now interests the Paris Club, and is mentioned in the text, is if after the agreement with the World Bank closed a two weeks ago, Argentina might be able to put together some global financial strategy to return to the financial markets, get funding, and resume the negotiations with the entity. Equally, the Paris Club, made up of states such as Germany, Japan, Italy, Britain, Spain, Holland, Canada and the United States, among others, mentioned in the paper that the future status of the country before the international markets is difficult and complicated by the negative decision of the Court of Appeals of New York on the lawsuit from the vulture funds and the possible rejection of the case by the U.S. Supreme Court.
The report explains that the resolution will not be immediate, but it will inevitably end in a (technical) default, and that the country’s debt rating will not improve from the CCC + from Standard & Poor’s of September 11.
The paper also shows, in the brief paragraph describing the meeting of the board of the IMF and the intervention of the representative of the World Bank, that this entity by that point had already become a direct ally of the Argentina.
It is now known that last September, Economy Minister Hernán Lorenzino had already closed the deal in the ICSID with five American companies over payment of about US$677 million in two year bonds with haircuts of 45% on interest and 15% on principal.
Then, at the joint summit of the IMF and the World Bank, the agency led by Jim Yong-Kim opened credits for the country for about US$3 billion over three years, loans that were blocked since the last quarter of 2011 by the refusal of the United States to endorse new loans until the debt with their companies before the ICSID was recognized and paid. Subsequently, once the Argentine payment plan was approved, the Obama administration instructed its representative to vote in favor of the country and the credits will begin to be released.
It was this new situation - when the representative of the World Bank before the board of the Fund raised the new scenario with the Argentina-that "Canada and other countries" (according to the text of the paper from the Paris Club) asked if there is any strategy for Argentina to go back to getting money on the international financial markets.
Ambito Financiero
Difficult negotiation with the vulture funds
Wednesday, October 23, 2013
The reporter spoke with Daniel Marx, economist from Quantum and former Finance secretary, about the options coming out for negotiating with the vulture funds. He says that proposing an assembly for the restructured bondholders to resign part of their interests for the holdouts is too complex. “It will face its first problem in that the ownership is dispersed.”
Reporter: Does it seem possibly to you that the restructured bondholders would resign part of their interests to resolve the conflict with the vulture funds?
Daniel Marx: It’s a very complex negotiation. In the first place, it depends on what will be exactly voted on and to predict if one can reach the necessary majority, which is high and around 85%, for it to be executed. Right there will present the first problem, which is that the ownership is dispersed. On the other hand, one can speculate that Argentina will participate in this assembly through the ANSeS, which would add several votes, but this could be objected to by alluding to this being an alter ego of the country itself.
R.: Would Argentina benefit with some of the options circulating as alternatives to the judicial resolution?
D.M.: In this option I’m sure of it, because it would not only take the issue away, but also there are other that are putting the money in. It also has to do with what haircut they are ready to assume. These are negotiations that are very much at the limit and all that we are supposing has to be put in context. Finally, it runs the risk that the argument of the negotiation is that the harm produced will be greater than at present, and that is dangerous.
R.: It also came out that there is a chance under study that after an eventual adverse ruling, the default will come, and then they would renegotiate with the vulture funds.
D.M.: In all the possibilities they are talking about there are complexities and holes. We don’t know what the plaintiffs have planned and we don’t know if they are the only ones or if others will appear later on.
R.: Are there points of agreement in the ICSID that could be replicated in the conflict with the vulture funds?
D.M.: The resolution of the Economy Ministry with the ICSID could be used as a precedent. If one reads between the lines, it shows that in complaints made official through the country a 25% haircut is tolerated on interest from the claimed amount and a 10% investment in bonds, like the BAADE. A door was opened on something there which until now had been unheard of
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