Ambito Financiero
Kicillof will define proposal to vultures before April
• He will select the offer that guarantees more dollars for the reserves
Thursday, February 20, 2014
By Carlos Burgueño
Axel
Kicillof has personally assumed, together with Finance Secretary Pablo
Lopez, the resolution of whether to accept or reject the new offer that
will be presented to the vulture funds suing the country in the United
States, in no more than a month. On the table he already has two
proposals that, today, have a pointed sting: the Swiss bank UBS and the
American bank, Goldman Sachs. He will listen in the coming days to
another idea, from HSBC of Britain; and finally, the Kicillof- López,
plus the intervention of the ambassador in the United States, Cecilia
Nahón, will mull over the proposal with the promise of the greatest
level of contributing “cash” for strengthening the Central Bank
reserves. According to the calculations of the minister and the
secretary, made before beginning the meetings to define the next
proposal to the vulture funds and the holdouts, to be successful the
negotiation could bring in, as a floor, funds for some US$1 billion or
US$2 billion.
The
basic strategy, in which both UBS and Goldman Sachs agree up to now, is
to buy the debt from the bondholders still suing Argentina and that
they gather the bonds in default for between 7 and 8 billion dollars;
with a haircut that would be much less than in the swap of 2010 (it was
63%) but with a cash payment. Argentina would then offer a long-term
bond (10 years or more), which would begin to pay under the next
president to succeed Cristina de Kirchner. For the bondholders that did
enter the swap, they would be offered a compensation or there is
speculation around when the December date expires this year, after which
(theoretically) there wouldn’t be a right to claim a greater
compensation than the bondholders that didn’t enter in any of the two
debt swaps that Kirchnerism promoted.
The
proposals, for now in the embryonic stages, were laid out by each one
of the international banks in official meetings in Buenos Aires with
Axel Kicillof and Cabinet Chief Jorge Capitanich. The first meeting was
with Goldman Sachs on January 29 and they sent the vice president of
the firm, Agostina Pechi; the executive director for Latin America,
Stephen Scherr; and executive director responsible for the Investment
Bank, Richard McNeil. The meeting with UBS was on February 12 with the
representative of the Swiss bank for Latin America, Gerard Cremoux.
The
official intention is to rapidly choose the offer that is closest to
the financial possibilities and necessities of the country, and which
rapidly begins a formal round of consultations with the holdouts and
vulture funds. These communications will be, obviously, at first
entirely between private entities and there will never be formal and
open negotiations between official representative of the Argentine
government and the vulture funds.
This
was one of the conditions for closing a deal that Goldman Sachs and UBS
carried with them to Buenos Aires. Politically, for Argentina, to sit
down at the same negotiating table with Paul Singer’s vulture fund
Elliott, the same which attached the Frigate Libertad in Ghana and is
suing (successfully) the country in the U.S. courts, is inadmissible.
About
the possibility that his fund would accept an offer of this type, the
extra-official rumors that are arriving at the eventual private
negotiators are volatile. On the one side, there are statements from
fund attorney Ted Olson and Singer himself, where it is said that the
only way to negotiate is formally, with the Argentina government making
the offer and intervening in the discussions; something that, the
parties know, is utopic. However, Elliott’s financial agent, Jay
Newman, said yesterday that “if Argentina wants to negotiate, the
dispute will be resolved rapidly.” The strategy of the vulture fund
(and its allies that still haven’t begun suing the country) is to wait
for an immediate favorable ruling after the rejection by the Supreme
Court in taking the case, to then negotiate with Argentina from a
stronger position.
From
Buenos Aires, private sources that participate in the elaboration of
the proposal that Kicillof must approve or reject, said that “Singer is a
businessman, he knows he won’t collect if he wins the lawsuit and that
the only alternative left is to sit down and discuss conditions for
collecting what some investment bank offers him.”
The
schedule that the government now has in mind is that the final proposal
be approved and presented in society before April 21. That day, the
attorneys for Argentina from the firm of Cleary Gottlieb Steen &
Hamilton (CGSH), Carmine Bocuzzi and Jonathan Blackman; together with
the associate for the litigation before the Supreme Court, Paul
Clement, will appear before the highest court to speak about the Elliott
complaint to attach the accounts of Banco Nacion. This will be,
according to the legal representatives for the country, the last chance
for making the Argentine case and convincing the judges to take it up.
Before
April 21, the government wants the offer to be circulated and the
possibility of an agreement to be closer. The decision to move ahead as
rapidly as possible on restructuring Argentina’s debt in default and in
the litigation in the United States was taken by Cristina de Kirchner
under the recommendation of Jorge Capitanich and Axel Kicillof. Both
convinced the President to definitively close the liability with the
Paris Club and with the lawsuits in the ICSID as a necessity for
starting to seriously sound out the alternative of placing foreign debt
to strengthen the reserves and solve the external financial front. In
principle, Kicillof didn’t want to take charge of this chapter and had
accepted leaving it in the hands of his predecessor, Hernán Lorenzino,
and the recently created Debt Renegotiation Unit which the ex-minister
manages together with former Finance secretary Adrián Cosentino.
However, Kicillof changed his mind and took, together with Lopez,
control of the foreign debt negotiation and the definitive exit from
default. Annoyed by the way the accord was done over the liabilities
from the ICSID, he ejected any choosing of an option that put the
ex-vulture fund Gramercy, of American Robert Koenigsberger, in charge of
the discussion with the holdouts. With Gramercy, at least until now,
Deutsche Bank was also separated, under suspicion also in other
government offices of having participated in financial actions against
the Argentine peso in the days of the currency exchange runs before the
devaluation of January 22 and 23.
El Cronista
Richard Samp: “The Argentine appeal has zero chance of success”
The
expert ventures to say that the appeal to the American Supreme Court
for the holdout case will not reach a good end. While the country’s
actions on the external front could favor its image in the United
States, he says it will have no effect on the decision of the highest
court.
Thursday, February 20, 2014
by MARÍA ELENA CANDIA Buenos Aires
“I
would say that there is a 50-50 chance that the Court will ask for the
opinion of the Solicitor General,” says Richard Samp, main adviser at
the Washington Legal Foundation since 1989, a public interest non-profit
law firm located in Washington D.C, which litigates in support of
individual rights, the free press system and against excessive
government regulation.
Close
to the most powerful group of holdouts suing the country in American
courts, Samp considers the Argentine appeal as a good attempt for the
Supreme Court to take the case, but has no chance of success.
-What is your opinion regarding the appeal that Argentina filed before the U.S. Supreme Court?
-It
surprised me that Argentina would center its argument on the highest
court having to send the case back to the Court of Appeals in New York
for it to decide, which has no chance of being successful. The Supreme
Court simply doesn’t work that way, if it wants to decide about a
question it will grant a review petition and if it doesn’t want to
decide an issue, it will deny the petition. But what it is not going to
do is determine that it doesn’t want to rule around a problem and a
continuation, take the case from the Second Circuit (which issued a
review decision) and deliver it to the Court of Appeals in New York.
This procedure was never used by the Supreme Court in his history.
-Why do you think Argentina focused on this argument?
-One
part of the Second Circuit decision that bothered some in the financial
community (and made the decision controversial) was the interpretation
of the court of pari passu. The court found that the clause had no
“standard” direction (as some had assumed) but that it requires that
Argentina give the same treatment to all the creditors. But the issue
that implies how one interprets the meaning of a contract is subject to
and controlled by New York state law, not federal law. And Argentina
knows that the Supreme Court is not in agreement with listening to cases
with the goal of deciding on state law issues. So the only way to put
this question forward on interpretation of a contract would be to ask
the Supreme Court to grant the petition, stay the petition and then ask
the New York court to prove its own interpretation of the pari passu
clause. A good attempt perhaps, but it has no chance of success.
-What other arguments did the country’s defense put forth?
-The
second question put forth by the petition argues that the measure
issued by the district court violated the limits imposed by federal law,
the law of sovereign immunity (FSIA). At least there is a small chance
that the highest court is in agreement with hearing this issue, since
the Supreme Court examines cases that put forth issues related to
federal law. But I doubt very much that Argentina will manage to
persuade the Court to listen to it, because the Second Circuit decision
about this question is not in conflict with the decision of another
appeals court. The existence of a conflict of this kind is always a
pre-requisite for gaining Court review.
-How do you believe the legal process will continue?
-The
NML brief will have to be filed before the Court technically in 30
days, at the end of March. But it’s almost certain that it will ask for
a 30 day extension to respond, extending its deadline to the end of
April. The motive has to do with the amicus curiae filings in
Argentina’s favor before the Court, which will have to be made within 30
days without any chance of getting an extension. This way, NML could
take its time reading all the amicus briefs before filing its response
to the Court.
-What’s the most likely final scenario?
-The
first question that arises is if the Solicitor General of the United
States will file an amicus curiae in Argentina’s favor in the period of
30 days, without the Supreme Court asking for it. The Solicitor did it
in the Second Circuit, but not when Argentine filed its first petition
for certiorari before the highest court in June 2013, so I believe that
the chance of the Solicitor filing his brief immediately is 50%. After
NML and all the amicus briefs are filed before the Court, the court has
to decide in mid-May if it will hear the case, or if it will reject it,
or if it will be assumed that the Solicitor still hasn’t intervened, to
issue an order asking for its opinion. Once again, I’d say the
likelihood that the Court will ask for the Solicitor’s opinion is 50%.
It did so in the discovery case before the Court in April, but not in
relation to the initial appeal that Argentina made before the Court in
2013. If it asks for the opinion of the Solicitor, his brief will not
be filed probably until December 2014 or January 2015.
El Cronista
New CPI would help with the U.S. but not with judges (Sidebar to Richard Samp interview)
Thursday, February 20, 2014
-Do you believe that the Court will take the case?
-At
the end of the day, I don’t believe that it will agree to hear the
case, because there is no division between the federal courts of appeal
in relation to the direction of the disposition of the FSIA in
question. In absence of a brief from the Solicitor General, Argentina
has zero chances; with his support, it has at least a small chance.
-Some
experts said that Argentina could mention the case of Pari Passu in the
hearing that the country will have before the Court on the discovery
case. Is it a good strategy?
-I
didn’t hear these speculations. I don’t believe it’s a good strategy
to put forth the pari passu question in the oral arguments in April
because the two cases put forth questions that have very little to do
with one another. To mention pari passu would do nothing to help
Argentina win the discovery case. It would complicate a case that
Argentina has a reasonable chance at winning.
-Argentina
corrected the inflation index and seems to be giving the impression of
seeking to settle other issues on the external front. Do you believe
that these actions will make the American government support Argentina
in this instance?
-Any
action that Argentina takes to settle its situation in international
financial circles without a doubt will make the United States government
consider it more favorably. And yes, a favorable impression of that
kind could be enough to persuade the United States to support
Argentina’s position before the Court. I doubt that these efforts will
have an effect on the opinions of the eight judges that will analyze the
case. I say 9 in place of 9 because Judge Sotomayor is likely to
recuse herself from the case. Her absence means that Argentina must
attract 5 votes of the 8 remaining to win. A 4-4 tie would uphold the Second Circuit decision.
La Nacion
Imminent agreement with Repsol over the confiscation of YPF
Thursday, February 20, 2014
by Martín Rodríguez Yebra | LA NACION
MADRID.- "I’m settling this.” Axel
Kicillof made that promise to Spanish Industry Minister José Manuel
Soria, in the most dramatic hours of the last currency exchange run (in
January) in Buenos Aires. He asked for “trust” in keeping the dialogue
alive with Repsol over the confiscation of YPF.
Several
concessions and one month later, the Argentine Economy Minister is one
step away from achieving his goal: the contract to compensate the
Spanish oil company is in its final hours, almost ready to be signed and
the final agreement could be announced before the end of the month,
political and economic sources who are aware of the negotiations
confirmed to LA NACION yesterday.
The
Argentine government plans to compensate for Repsol over the sudden
nationalization of 51% of its shares in YPF with US$5 billion in
Treasury bonds that expire in 10 years. That was what was contained in
the agreement announced in November.
It
now remains to be seen what additional guarantee has been added to
ensure that the Spanish firm can monetize those securities to a value
close to the one agreed to and that the bonds will have in nominal
value.
The
approach could include the delivery of bonds with a nominal value
greater than the one announced, according to Spanish sources. "It is
close to decided how that modification would be established without
being able to say that the amount of compensation increased,” said one
of the negotiators.
The
deal between the parties had bogged down with the devaluation crisis in
January for fear of the Spanish accepting paper that would have a much
lower market value than US$5 billion. According to Spanish financial
analysts, today Repsol could pocket no more than US$3 billion for that
package of debt if it wre to negotiate them in the short term.
The
envoys from Antonio Brufau, chairman of the oil company, asked that the
bonds be guaranteed by the reserves of the Central Bank to make them
more attractive, something which Kicillof refused. However, he agreed to
analyze other financial formulas that "shielded" the value of the
compensation.
The
bonds offered by Argentina would have an interest rate of between
8.25-8.75% - a high profitability – and would include the possibility of
a partial amortization of the principal within a period of two years.
Although
the parties are talking in strict confidentiality, financial sources
said in Madrid that and an international bank is participating to ensure
the liquidity demanded by the Spaniards.
Both
the Casa Rosada and the Moncloa; YPF and Repsol, all point out that the
agreement is "imminent". It was even suggested days ago by Brufau
himself, to whom the government attributed for a long time an intention
to boycott any possibility of agreement: "I am optimistic in thinking
that for the sake of Argentina as well as for Repsol we will be able to
try to quantify an amount of restitution and finish with this story. We
are very close."
Rushing the passage
In
the past ten weeks, there was an intense back and forth of directors of
the company to Buenos Aires. Kicillof, moreover, had an open dialogue
by phone with Soria, the man that President Mariano Rajoy entrusted to
resolve the crisis.
The
Economy Minister intensified the political negotiations when global
alarm over the devaluation of the peso had jeopardized the agreement.
He
told his Spanish counterparts in advance that he would provide fast
signals of predictability (such as acknowledging inflation) and that
this would restore calm to the foreign exchange market. "We are not
heading toward a default; This is something temporary," was one of the
messages that they recall in Madrid. Thus, the man to whom is attributed
the ideological authorship of the nationalization of YPF is the one who
is moving fastest to pay the Spanish as soon as possible.
The
agreement was delayed - government was thinking of of presenting it in
January, but negotiations were never interrupted. "After the
devaluation, Kicillof was more permeable. The dialogue improved
significantly,” said one of the company’s shareholders in Repsol.
For
the Casa Rosada, closing the file on YPF now has taken on a capital
value: it would be a trophy to show the world that there is some
normalization of the economy. In the same way, it is trying to come to
agreement with the Paris Club to pay the debt in default and moving
ahead with orthodox measures that the International Monetary Fund (IMF)
has called for over a long period of time.
The
intention is that the final offer be voted on at the monthly meeting of
the Board of Directors of Repsol, planned for Tuesday or Wednesday. If
it is not terminated down to the fine print by then, they could convene a
special session for next week.
Ending
with the economic and diplomatic conflict that blew up in 2012
requires, in addition to the willingness to pay, a delicate legal
engineering. The company must commit itself to renouncing the
international litigation that it filed against Argentina - which asked
for US$ 10 billion as compensation - and that complicated the
investments needed for the deposit at Vaca Muerta over the past two
years.
The
text of the offer which could be final flew back to Madrid yesterday.
This week the dialogue went from YPF Tower in Puerto Madero to the
Palacio de Hacienda. On one side, Kicillof; on the other, a top-level
mission from the company made up of the director-general for business,
Nemesio Fernández Cuesta; the financial manager, Miguel Martínez; the
Deputy Secretary-General, Miguel Klingenberg, and Director of corporate
finance, María Victoria Zingoni.
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