The total debt with the holdouts is no more than 2.2% of our GDP. A number that is not negligible, bit certainly is not (nor should it be) “the issue” of the Argentine economy looking ahead.

 

La Nacion

Criticisms for the vulture funds on a panel at the IMF assembly

Attorneys, among others defending the country, warned about a possible and “dangerous change in the rules” in debt restructurings

 

Sunday, October 13, 2013

 

By Silvia Pisani

 

WASHINGTON.- The vulture fund litigation against Argentina created a debate in the assembly of the International Monetary Fund (IMF), with a warning on the risky “change in the rule of the games” that its progress in the American courts will have on future debt restructurings, which is generating growing clamor for the organization to intervene.

 

"Thanks to what is happening (in the New York courtroom of Thomas Griesa), the possibility is arising that (these kinds of funds) are acting not only against countries, but also against other creditors,” warned attorney Lee Bucheit during one of the meetings of the assembly.

 

"With this kind of action, one could almost say that to be a holdout (a bondholder that rejects debt restructurings and sues a country) is becoming a true path to prosperity.  It could take a while, but it’s promising,” he joked.

 

His take was celebrated by many of those in attendance, beyond the moniker of being a partner at the firm of Clearly Gottlieb, which is carrying out the defense of Argentina in the courts of New York.

 

With people standing even in the aisles, not even a pin could fit in the main auditorium of the IMF headquarters when the number two of the entity, David Lipton, opened a roundtable about the lessons of recent debt restructuring processes.

 

His thesis was the convenience of the Fund involving itself more in the phenomenon of the giving greater predictability both for creditors and countries involved.  His greater audacity was to suggest a reflection about looking at “modifications” to the so-called “pari passu clause”. Referring to equal treatment of creditors, it is a legal chess piece upon which recent rulings were constructed by Griesa, who has Argentina’s debt policy in check mate.

 

But it is not seen as a remedy nor much less: Lipton predicted that, with a proposal advancing, it will not be a debate “for next month” nor based on the actions of the lawsuits of Elliott Management, the fund that already obtained two rulings against Argentina.

 

Most of the seats in the room were occupied by those who have been following the case and who always attend seminars on the subject.  There were also Argentine officials and economists, many of them taking notes.

 

The seminar was a new turn for the Fund about the document it issued last May, in which it warned about the risk of upholding Griesa’s rulings which condemned the government to pay US$1.3 billion to the vulture funds and, if it is necessary, to attach the money the is destined to paying the huge majority of creditors that accepted the debt swaps of 2005 and 2010.

 

It was also a new way to raise its voice on the matter, after in July its intentions were frustrated in filing in favor of Argentina before the U.S. Supreme Court, after Washington opposed taking this step.

 

"Countries will have to have a voice in this debate,” said attorney Rafael Molina, partner at New State   Partners, reproaching absences in what was, without a doubt, one of the most successful panels at the assembly.

 

At the same time, Minister Hernán Lorenzino charged once again against the “vultures” and handed out flyers about the country’s “legal strategy”.  He celebrated the agreement in principle for Argentina to access loans from the World Bank and said that “they will not be used as substitutes” for the capital markets, which the country does not access.  There was no comment, however, on the agreement with five companies over the payment of US$500 million for adverse judgments in the arbitration tribunal of the World Bank (ICSID).  

 

The IMF meeting closed yesterday with concern over the fiscal crisis threatening the United States and its possible impact on the world economy.  “We are four days into a very dangerous moment.  We cannot allow disaster to strike,” said Christine Lagarde, making a firm call for the American political class to find a solution.

 

 

Clarin

Argentina’s debt goes back to being an issue at an IMF meeting 

The number two at the Fund said that changes should be made based on the vultures’ lawsuit

 

Sunday, October 13, 2013

 

During a seminar about “Sovereign debt restructuring: lessons of recent experiences,” David Lipton, the number two at the IMF, made it clear that – after the Argentine experience – an issue that worries them is the focus on how contracts are designed which are signed when countries place bonds.  “The last restructurings and the lawsuits on Argentina currently in course in New York have made clear the certain limitations of the current contractual focus,” said Lipton, in the framework of the Annual Assembly.  “We are examining ways to strengthen collective action clauses to make them more robust in the fact of potential holdouts (vulture funds) as well as possible modifications to the pari passu clause which ensures consistency and predictability in all jurisdictions,” he added.

 

It’s worth recalling that the U.S. impeded the Fund from filing an amicus curiae before the Supreme Court in favor of Argentina in which it was to explain that, if the country lost to the vultures, its defeat will be a bad precedent for future restructurings.  All the analysts consulted by Clarin said that the U.S. wants to wait until the Supreme Court asks for its opinion.  And if that occurs when Argentina files its second appeal, without a doubt the Fund will file its own.

 

After having presented a new Price Index before the IMF, and after the agreement that was sealed for paying the judgments that Argentina lost at the ICSID – the arbitral tribunal of the World Bank – which unblocked access to the entity’s credits, Economy Minister Hernán Lorenzino is not losing hope.  A source said to Clarin that members of the delegation that traveled with Lorenzino to Washington tried to contact Paul Clement, former solicitor general before the U.S. Supreme Court during the government of George Bush, in search of advice.  But this correspondent could not confirm the information.

 

As it was, the conference in which also was participating Robert Gray, of HSBC; Lee Buchteit, of the law firm defending against the vulture funds Cleary, Gottlieb, Steen and Hamilton; Rafael Molina, of New State Partners, took place in a room at the Fund, which was full.

 

Lee Bucheit said that the European crisis showed that debt restructurings are not only an illness of emerging countries.  He added that the lawsuits against Argentina indicate that, while “before it was thought that the holdouts would be discouraged by the difficulties that they face to have rulings respected and to find attachable assets, they created a legal theory that gives them power not only over the debtor but over other creditors.  That is, in turn, considerable.”  

 

Rafael Molina argued, however, that every case is different.  “We should not make decisions that could have effects in the future based on one or two cases that could be unique.  While there are lessons to learn, perhaps they are not applicable to all.”

 

 

Perfil

The government today would pay 10% to get external credit

With rumors that those in the Economy Ministry are working on going out to seek financing, analysts warn that it will pay more than the region

 

Sunday, October 13, 2013

 

by Paola Quain

 

The government’s idea of going back to the international debt markets, which this week translated into meetings of the economic team and Minister Hernan Lorenzino with representatives of the World Bank and the IMF in Washington to resolve pending issues of the new CPI and open the debate about the conditions with which the country finds itself, in case of returning to seek financing.

 

Officialdom, through House of Deputies Speaker Julián Dominguez, yesterday reaffirmed the turn on the economic outlook.  The legislator said that “the government never let go of its pro-market policy,” by which he said, in an interview with Radio El Mundo, that it was not an economic course change.

 

Sources close to the Economy Ministry explained that the payment to five companies that have a ruling in their favor in the ICSID for some US$677 million are part of the plan to return to the markets.

 

Part of the Executive Branch is hoping that, with these latest agreements and the oxygen that the US$3 billion from the World Bank will allow, “that the markets will soon be talking about lower Argentine risk, in the order of 800 points”, some 100 less than the 920 country-risk basis points that averaged this week.

 

So, the idea would be to get funds in the second quarters of 2014 at a cost of a single-digit.  “The markets are not jerks,” they say at Economy, and said that there will be proposals like those in 2010 from the financial sector.  The rationale is that, at a minimum, “there could be a rollover of debt maturities that are coming next year, and thus alleviate the drop in reserves.”

 

Scenarios. For Daniel Marx, director of Quantum Finanzas, having to estimate a rate for going to the market will require taking as a reference the yield on Argentine bonds in dollars that are quoting abroad, which are around 10% today.  “If one takes the corrective measures it’s possible that the cost will be lower,” said the ex-secretary of Finance.

 

And it is that the high yield for local assets is explained, also, by policy decisions from the past.  “The lawsuits in the ICSID, the holdouts and the Paris Club, are three issues that were handled badly and in a very slow manner,” said Luis Palma Cané, director of Fimades, while Gabriel Holand, director of HR Global Consultants added: “to reduce inflation and resolve the issue of the clamp are important issues for reducing a possible interest rate.”  

 

At Economy, they are betting that the timing in the American courts will extend to December 2014 for the clause to be deactivated that makes a payment – to the vulture funds – in better conditions than those accepted by those who entered the exchange, set off the filing of new complaints.

 

The provinces already aim at the local market with the placement of dollar-linked bonds – in pesos attached to the dollar.   This week, Chubut put out the equivalent of US$318 million in paper at 4% for six  years. Juan Ignacio Di Santo, public sector specialist at Puente – one of the underwriters – explained that “the terms for provincial operations are extended and have a big demand from companies that have pesos and want to cover them from an exchange rate depreciation.”  

 

 

La Nacion

The priorities of the future

 

Sunday, October 13, 2013

 

by Federico Sturzenegger  | Para LA NACION

 

In recent months, rivers of ink have run in the discussion of the possible costs of an adverse result in the U.S. courts from the lawsuit with the so-called “vulture funds.”  The issue returned to the newspapers this week, with the refusal by the Supreme Court of that country to take the case.  But heightened attention for this was disproportionate with the magnitude of the problem.  The total debt with the holdouts is no more than 2.2% of our GDP.  A number that is not negligible, bit certainly is not (nor should it be) “the issue” of the Argentine economy looking ahead.  

 

In fact, what is much more relevant are the other debts that Kirchnerism will leave for us, like those with retirees as a result of the lack of pension mobility in the presidency of Nestor Kirchner, and by the some 400,000 cases that are accumulating in the courts.  This debt alone to date represents some 15 points of GP.  The fall in the reserves of gas and oil and the contraction of the cattle stock add another 14 points of GDP, and to this one must add the deterioration of our capital of infrastructure in trains, roads and electricity, which is very difficult to measure.  

 

But it’s fitting to recall Lacan when he said that “the first virtue of knowledge is the capacity to face what is not evident,” a phrase that I mention because all those balances are small with regard to another, a much greater one, which is not so visible.

 

Argentina faces a completely new situation looking to the future from the discovery of unconventional gas reserves, the second largest in the world. Measured by the price we pay today to import gas by boat, the value of these reserves is equivalent to the huge number of 9 times Argentina’s GDP. In other words, it is 415 times greater than the liability that would be paid to all the holdouts and 3400 times greater than the specific amount of being sued for today in the United States.

 

It seems, then, that it would be interesting to devote more time to this subject, which is particularly relevant because much is changing in the energy market at the global level. The development of new reserves of non-conventional oil and gas allows to anticipate a world with abundant and cheap energy in the near future. In the United States, the price of gas has already fallen by one-fifth as a result of the exploitation of these types of deposits, leading to a reindustrialization of the American economy (so it’s better to put aside the extreme positions of Pino Solanas and leftist groups who are opposed to the exploitation of resources), and it is expected that this increase in production will tame gas and oil prices around the world over time.

 

Given this scenario, that gas that today we have sunken below Vaca Muerta may be worth less tomorrow than it is today. Assuming that the price of gas in the international market converges in a period of 20 years at the current price of gas in the United States, delaying that operation by five years may represent a loss for the country equivalent three times GDP, since those resources would be extracted when they are worth much less in the world. Delaying its exploitation by five years is equivalent to 140 times the cost of resolving the dispute with the "vulture funds" or 20 times what it would take to solve the lack of pension mobility. If the delayed education budget adds up to 6% of GDP, it would be equivalent to losing what will be invested in education during the next 50 years.

 

However, this delay is already here with the legal uncertainty that the government has imposed on the energy sector, primordially with its arbitrary interventionism and its practice of confiscation.  This situation could end up being the biggest loss of wealthy that Kirchnerism is responsible for.

 

A similar view is seen in the discussion about the international reserves in the hands of the Central Bank, an issue that worries me relatively little.  The reserves only serve a country without credibility.  For that, Argentina, even with the spectacular fall of recent years, has reserves that are equal to 8.4% of GDP, when those of Canada are 3.9%, Australia 2.9% and the United States 1%.  With a credible government, reserves not only would not play a relevant role, but they would be rising, not going down.  One shouldn’t worry about the level of reserves, but that we have a government without any credibility.

 

These examples that we are giving allow one to conclude that it is necessary to recover the Congress as a place for debate over the real priorities of the country looking forward.  To recover it as a place where one can take apart this tendency to think of unimportant things as being important, and where we could focus on what is important but unseen.  Definitively, perhaps in the weakening of the possibility of debating in that arena resides the biggest unpaid balance that Kirchnerism is bequeathing us.