Clarin
Economy has already given the green light to two plans to close the lawsuits with the vultures
Sunday, November 3, 2013
By Gustavo Bazzan
The Economy Ministry opened the little window for its inboxes. Now it seems that it’s ready to receive and listen to those who are bringing proposals to the government to solve the problem with the vulture funds, who until now have been winning the tug of war in the courts of New York. First in was the investment fund Gramercy, but just entering the race is the Garrido law firm, through a possible solution designed, among others, by an expert in these issues, Eugenio Bruno.
The two efforts aim at the government being able to slip out of the certain sentence that the U.S. courts will give in favor to the vulture funds and which will oblige the country to pay them US$1.33 billion. Both require the joining of the bondholders that already entered the swap, and the acceptance of the holdouts. This is no small feat.
Gramercy’s idea is very simple. It consists of sending part of the funds that the bondholders are to receive that already entered the swap, into an account that will be in the vulture funds’ favor.
The sequence would be like this. First, the commitment is obtained from the holdouts to enter Swap III, and from the bondholders to accept this sort of “haircut.” Then, once the swap is reopened, a trust fund is created where a percentage will be deposited from what the bondholders will be collecting (it could be 10 or even 20%) to pay the vultures.
Why would the bondholders give up?
Because if the conflict ends, bond prices should rise. On the contrary, if Argentina gets a sentence against it and doesn’t pay – as has already been announced – it could lead to a plunge in bonds. In fact, since the terms of the proposal have leaked, debt paper have seen a significant jump in the markets. And the bonds in default as well.
Gramercy is already talking to the big and small bondholders and set a goal of having a deal closed before the end of the year.
The second proposal was hear of recently.
Bruno’s plan aims at, he says, “an integral solution” for the 7% of debt still in default. “We don’t seek a settlement to get Elliott out of the way, because then the other holdouts will come. We want to undo the problem for good.” To pay the holdouts he proposes two bonds: one at a still-undetermined term (to be negotiated with the creditors) and at a rate of 4% annual, to settle the principal, with a 75% haircut. A second bond would be issued for interest, at 5 years and with a 4% interest rate.
To make this payment, Bruno proposes that the bondholders accept an early expiration of the RUFO clause in April 2014, which impedes improved offers of payment to bondholders that didn’t enter the swap over those that did accept one of the two swaps, in 2005 and 2010.
At the same time, he proposes that both the holdouts that enter the new swap as well as those who already have commit to putting part of the funds they will collect from here forward into a subscription into the BAADE bond. This way, he supposes the government could bring in US$1.5 billion.
In the same agreement, Bruno incorporates the subscription of bonds for specific investors in Vaca Muerta, for another US$2.5 billion, which would be directly subscribed by companies in that sector.
Finally, he suggests that specific cases (like pensioners) could collect 100% of what is owed them, and all at one time.
Eugenio Bruno, who is an optimist, concludes that if his plan comes out well, “Argentina solved this whole issue of the holdouts once and for all, forgetting the judicial threats and, also, gets fresh money.”
It remains to be known what the bondholders and the vulture funds think.
Both Gramercy and Bruno share the basis that if Argentina loses the case, the vulture funds will have nothing to celebrate. To enter a third swap, they say, would equally bring huge gains into their accounts.
Clarin
Private ideas, after failure in the courts
Sunday, November 3, 2013
by Gustavo Bazzan
The government is on the road to privatizing the handling of its debt in default.
After failure in the courts of New York, both in the courtroom of Thomas Griesa as well as in the Court of Appeals in New York, now it is “listening to ideas.” The leaders of business understand there is an opportunity and for that they’ve begun to move. Both the investment fund Gramercy as well as the law firm Garrido perceive that there is room to sell a plan.
Despite the vulture fund Elliott having two rulings in its favor, it’s not certain that a third and definitive ruling in the U.S. Supreme Court will guarantee that it will collect. It happens that Argentina said that it is not thinking of abiding by it.
The consequences of not paying the ruling would make up a scenario in which all the parties lose, at least in the short term. Elliott because it will not receive what it expected. Argentina, because it will fall into a new default, at least until it manages to channel payments through another jurisdiction. The bondholders that entered the swap, because they will run the risk of attachment, the channel of payment used until now.
Upon this three-banded weakness, Gramercy and the Garrido firm felt encouraged to ring the doorbell at Economy and offer their services. The important thing: Economy opened the door, invited them in, listened, and, it seems, gave them the green light. The “intermediaries” believe in seeing also that there is a new scenario and a new relation of forces in the heart of the government. Guillermo Moreno is weakened by the failure of the capital amnesty, which didn’t manage to bring in money nor halt the deterioration of the Central Bank reserves, and the line of government that seeks market solutions seems to have been revived. In fact, in the world of finance it is known that both Minister Hernán Lorenzino, as well as Finance Secretary Adrian Cosentino and even Vice President Amado Boudou are the ones with the idea of settling with the creditors. They have been for many years, but they were restrained, until now, by the presidential discourse closer to the thinking of Guillermo Moreno and Axel Kicillof.
There is a lot lacking, but the government perhaps will be encouraged to say that if an agreement is reached, it will have solved the issue without kowtowing to the vulture funds.
Clarin
There are still no details over the payment of a fund linked to Boudou
It’s over the claims in the World Bank. Gramercy collected and the government hid the information.
Sunday, November 3, 2013
by Ezequiel Burgo
Argentina paid US$500 million for claims from foreign companies without reporting the details of the operation and through an unprecedented procedure.
The government delivered money to friendly funds, among them Gramercy, a group of restructured bondholders that supported the 2010 swap. Gramercy, together with other fellow travelers, is moving forward at the moment on the plan that got the green light from the Economy Ministry: to convince the bondholders to give up a portion of their interests they are collecting and deposit it in an account in the name of the vulture funds. This is the bet for deactivating the debt lawsuit in the United States that is marching today to a resolution in the U.S. Supreme Court.
The news that Gramercy and other funds collected US$500 million on Friday, October 18 was confirmed to this newspaper by the Economy Ministry and Gramercy spokesmen. On Saturday the 19th, Clarin ran a headline on the front page about the payment to a vulture fund for lawsuits abroad.
The administrative operation didn’t take into account the opinion of local justice. Not a single Argentine judge officially approved the ruling of the international tribunals of the ICSID of the World Bank. According to what this newspaper learned, the government was backed by an opinion from the Solicitor of the Treasury which assimilated the WB ruling like an Argentine court under bilateral investment treaties. The opinion was not reported in the Official Bulletin.
Experts consulted by Clarin explained that the payment to foreign companies for lawsuits in the ICSID don’t happen in the framework of bilateral treaties. The rulings are synonymous with sentences. “From there you can turn to the executor process,” explained Horacio Tomás Liendo, attorney and ex-Legal and Technical Secretary, “to make official the sentence in Argentine justice, the position that the government has argued.”
For Liendo, the maneuver that Argentina chose is “a new one for the chosen administrative procedure.” The country paid the privatized companies the claims without a ruling from Argentine courts. According to another attorney, there surely was no illegal action. “But the government will have to explain. Only the parties know the details of the negotiation.”
Argentina signed at the start of October an agreement to pay off the rulings from five companies of public services in the ICSID tribunals. The settlement was with four companies that sued in ICSID (Azurix, CMS Gas, Continental Casualty and Vivendi) and a fifth (National Grid) which went to the tribunals of International Merchant Law. But it was Gramercy that collected on October 18: this fund had bought the lawsuits from two firms (National Grid and Continental) and was an advisor to another (Vivendi). On October 18, Argentina also paid another fund, Blue Ridge, which held CMS’s claim.
In the interim, since it came out that the government would pay the ICSID lawsuits –mid-September – on October 18, the price of Discount bonds rose 31.8%. Gramercy is one of the funds that holds these warrants in its portfolio, which Argentina delivered to it in the 2010 swap when Boudou was Economy Minister.
Economist Javier Alvaredo, director of ACM, spoke about the consequences of the hiding of these payments. “In addition to being in line with an improvised style of financial policy, it raises the probability that speculative profits are being made.”
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