Infobae
Negotiation fails for private creditors to pay the debt with funds in default
The Gramercy fund, allied with the government, couldn’t convince the rest of the bondholders to give up the payment on their bonds and contribute US$1 billion to Elliott and Aurelius There are other intermediaries negotiating.
Tuesday, October 29, 2013
By Leandro Gabin
The plan that was being sounded out by an investment fund allied to the government ended up not getting a quorum. Gramercy, through different emissaries, was talking with other funds that accepted the debt swaps with a peculiar idea: that all the creditors ceded part of the future payments of their bonds, for approximately five years, to buy the debt from the vulture funds Elliott and Aurelius. They are asking in the U.S. courts for US$1.4 billion. Gramercy thought that they could get around US$1 billion to convince these funds to buy the lawsuit. This way, they believed, would dispel a potential default by Argentina.
According to what InfoBAE confirmed from sources linked to the case, the Gramercy idea hit against a wall. There was no agreement between the funds, something that was presumed to now be a total of 200 that would have to agree. Several of them, even, showed themselves annoyed with the Gramercy request. “They have particular interests with the government. It isn’t interesting to us to put money from our pockets in again. If the government isn’t involved, any plan will head directly to failure,” one of the funds that swapped its bonds in default in 2010 (and with complaints) indicated to this publication.
"Nor is it clear that paying a sentence to the holdouts will make the rest of the bondholders that accepted a swap be able to complain. That is something very unclear that the attorneys and the government put in so as to not pay. But there are doubts here about those arguments,” added the financier. This has to do with the risk that paying the debt with the vultures would activate the Rights Upon Future Offers (RUFO) clause which was granted to the bondholders the right to benefit with improvements over what was offered in the swap. Or, that all of them ask for more money.
Another fund said that by their own statutes it’s “impossible” to adhere to a plan like that, and also went back to naming the national government as a necessary actor in this movie. “The idea that they have been consulting with us on doesn’t even contemplate the free riders (those that wouldn’t accept that proposal, with the risk that they can litigate if they sought to oblige them), with which we turned it down flat,” they said.
A central problem that the Gramercy plan has was that this would have been a negotiation among private parties with needs and realities that are very different among them. Some of the funds that entered the swap bought bonds before the default (expensive) and don’t want to cede their gains to another that bought cheap. For example, Argentine or Italian bonds bought their bonds at 95% of their value; while Elliott and Aurelius did so in 2003 and 2008 at 40 or 50% of their value.
The EM fund of Kenneth Dart, another of the vulture funds known around the world but which doesn’t have a favorable sentence, bought part of the bonds before the default (at a higher price) and another part after the default (cheap). With which, depending on what moment each fund made its investment, their pretenses will vary.
Integral plan for the debt
The attorney for the Garrido firm, Eugenio Bruno, is who is working on an alternative plan that involves not only 93% of the bondholders that entered the swaps, but those investors with firm sentences in New York (or those close to being executed), the holdouts and the government. The idea would be that the plan that is eventually arrived at doesn’t sideline potential claims.
The expert believes that the plan must address the 7% that still didn’t accept any offer from the government with the swaps. From that 7% the vulture funds represent only 2% while there is another 5%, around US$6 billion, which is awaiting judgment in the U.S. Among them, there are Italian bondholders with US$2 billion that obtained the support of Judge Thomas Griesa and will be close to en execution order on the sentence. “All fronts have to be addressed for it not to just be a way to buy time,” Bruno explained.
So far, the government will have to do something that it cannot do now if it wanted to. Because of the RUFO clause, which expires at the end of December 2014, it’s impossible to launch a better offer for those 7% that didn’t accept the swaps. As such, it’s clear that any offer from those already known will hit against the refusal of the creditors. Starting in January 2015, the government will have its hands free to improve the offer for the dislocated bondholders.
For that, the negotiations are beginning which involve all the actors of this story to reach a plan that comes to light in the long term. In the interim, the government will continue seeking to stretch out the timetable and gain time. The unknown is whether the American judiciary will accelerate its decisions, with the risk of putting the country between two hard spots: paying, or declaring a default.
La Nacion
The government seeks to return to the market to finance public works
Tuesday, October 29, 2013
by Martín Kanenguiser | LA NACION
The Economy Ministry has “the permission and the order” of the president to resolve the external agenda pending since 2001 with the intention to go back to taking voluntary debt in the markets, a tool interrupted in 2007, with the goal of financing infrastructure projects.
"The minister was ordered to close the external front,” an official source said to LA NACION last night, without dismissing rumors nor exaggerating the rumors around the continuity of the chief of the Palacio de Hacienda.
The end of this strategy, which twists the decision of financing only with Central Bank reserves, is “to take debt, but with a specific goal, like financing infrastructure projects, not for just any ends,” like financing current spending, the source added. In this path the negotiations began in recent weeks, despite the skepticism of various private analysts, transcended the rhetoric and showed that, at least in the crossroads, the Lorenzino-Boudou axis has more oxygen than the Axel Kicillof-Guillermo Moreno one. This is so despite the huge differences between the minister and the Vice President, which has become as cold a relationship as it was four years ago.
In particular, the order for Lorenzino allowed him to move ahead on various issues, despite the iron-clad internal opposition that this agenda of getting closer to the market faces:
l The agreement with the World Bank to recover credits after the freeze imposes by majority shareholders in 2012, which will be voting before the end of the year.
l Associated with this, the decision to pay the companies with final judgments in the ISCID with bonds, whom he was demanding, previously, to come to the country to collect.
l The permission for the investment funds Gramercy and Fintech to negotiate with the more aggressive holdouts, like NML and Dart, to buy the pending debt and end with the case that is heading towards a definitive sentence against the country in 2014, in the United States. “As long as someone else assumes the difference, it can be done,” explained the source, reiterating that, in financial terms, the government will offer a similar option to the vulture funds as the one given to the bondholders that entered the swaps of 2005 and 2010. This third operation still has no start date.
The negotiation with the IMF over the new CPI, after more than six years of manipulation, which allowed for a stretching out of the timetable for the entity’s board to evaluate if it would apply a new sanction or not, after the motion of censure last February. On the 13th of next month, the case will go to the board and, according to Economy, only in February will the issue be voted on. “The minister’s meetings this month in Washington were very positive,” said the source.
In turn, there is more caution about the Paris Club, because the official creditors will continue putting forward the previous condition that the IMF go back to conducting its review of the Argentine economy, paralyzed in 2007 (Article IV), right after the start of the manipulation of the INDEC data.
All these issues, clearly, will not end up being sealed while the temporary absence of President Cristina Kirchner from power over health reasons. On the political plane, Lorenzino two days ago was in the FpV bunker – different from Moreno and ANSeS chief Diego Bossio, one of the candidates to succeed him – and yesterday there was a long meeting with Central Bank President Mercedes Marcó del Pont. However, the ups and downs around the minister, for now, don’t seem to threaten the continuity of this agenda, as both Bossio as well as another candidate, Sergio Chodos, will not think of “deepening” but in correcting, equal to Boudou. On that, Agustín D'Attellis, economist from La Gran MaKro – which responds to the Vice President – highlighted to LA NACION that these negotiations “have to do with the possibility of counting on more convenient access to the international markets if it is necessary.” In particular, he said that “the possibility of taking debt with specific ends, like infrastructure projects or investments in key sectors like energy, is an interesting alternative in this stage of the economy cycle.” And added: “It’s also important to count on the possibility of some roll-over of debt in the coming two years, since one of the factors that explains the fall in reserves has to do with the commitments of debt maturities.”
El Cronista
Analysts predict a bigger devaluation and an approach to the markets
With the election results, where Kirchnerism was assured control of Congress but lost in all the big districts of the country, economists expect changes, but not sudden ones.
Tuesday, October 29, 2013
MARIANA SHAALO Buenos Aires
Following the results of the legislative elections, local and foreign economists and analysts put forth the need for the government to introduce corrections on various fronts.
"Economic policy in the next year will point towards not stirring the pot too much so there will be no drastic changes. It seems more likely to me there will be a rate of annualized devaluation rate closer to inflation than a regime change although the exchange restrictions, the quantitative management of imports and the introduction of restrictions on tourism and shopping abroad are not incompatible with this position,” said Sebastian Vargas, analyst for the investment bank Barclays, in an interview with this newspaper.
"My feeling is that after the electoral year, protection of the reserves is a priority. We have seen complementary measures such as, for example, an improvement of relations with certain creditors and agencies, which will help to reduce the scarcity of hard currency in two ways: marginally increased financing to the public sector and smaller exit of capital from the private sector. The difficult question is if this will be enough to lead to growth,” he added.
However, for Michael Henderson at Capital Economics, "against an already fragile backdrop, marked by rampant inflation and capital flight, there is concern that other tools to pump up growth, through the lax fiscal and monetary policy, in a desperate attempt to hold onto power, will accelerate Argentina’s decline in the economic crisis.”
In relation to the split currency rates that some analysts saw coming after the election, former Finance Daniel Marx stressed that "in fact, it is already being done, the news will be it being formalized.” Marina Dal Poggetto, Director of Bein, agreed on this point and said: "the split currency rates attack the shortage from the point of view of demand but it’s not clear to me what the favorable medium-term impact is: it doesn't resolve the problem of competitiveness and would increase the pressure from the sectors to access a higher exchange rate". Meanwhile for economist Ricardo Arriazu, the government will "deepen the controls on the exchange rate, especially in the tourist market" and the reserves of the Central Bank will continue falling at a “growing rate.”
Paris Club and holdouts
The majority of analysts consulted expected measures to encourage the input of capital will continue and thus it will relieve the pressure from a shortage of dollars that the Argentine economy is registering today.
"Everything is going slowly, at least in their minds. It’s the approach of the discussion with the Fund and a discussion could be put forth with the Paris Club. The ICSID precedent could be raised to the lawsuit with the holdouts, but this wouldn’t happen in in the next few months,” estimated Marx.
"The agreement with the Paris Club is a scenario without the opening of formal credit is something that Argentina will have to do but if it involves a payment in cash with few installments, the impact will be unfavorable. The agenda now is to get dollars for the capital account, with the Baade, the Paris Club and a swap with China," said Dal Poggetto. "The change is clear, there is nothing in view for placements of a bond but the way is open a bit and the margin for maneuvering will be there for the capital account,” she explained.
"To gain time from external restriction and leave the final correction to the next administration, the government has already begun to test an outreach to international financial markets,” stressed, for his part, Dante Sica of Abeceb.com. "The payment of judgment debts in the ICSID, the negotiation on a new CPI with advice from the IMF and the reopening of the swap point to showing a willingness to pay, which accounts for the intention of the government to access new funds. Also the search for foreign investment will deepen, with a focus on energy, through the exploitation of the Vaca Muerta deposit in conjunction with YPF,” Sica said. In this sense, for the analysts it will be important to define the exchange rate that will be taken for the inflow of investment because the official rate is not attractive for the companies and he mentions that one Baade dollar at around 8 pesos could stimulate the entry of hard currency.
El Cronista
Vultures: set backwards on the change of jurisdiction on bonds to save the stay
An official at Economy swore that the government will respect an adverse sentence. That would leave without effect a voluntary swap of bonds that was announced by broadcast
Tuesday, October 29, 2013
ESTEBAN RAFELE Buenos Aires
The government said before the U.S. Court of Appeals that it will comply with an eventual adverse decision in the litigation it is maintaining with the holdouts, in order to assure the keeping of the stay which is benefitting the country and keeping clear of a judicial attachment on normalized debt payments.
In this way, the Executive stepped back on the voluntary change in jurisdiction on bonds announced by President Cristina Fernández, by national broadcast on August 26 to avoid attachments on restructured debts, official sources confirmed.
Last week, the Chief of Cabinet of the Economy Ministry, Fabián Dall'O, filed a notice before the Court of Appeals for the Second District (sic) of New York, where he committed personally, under penalty of perjury, to ensure that Argentina will comply with what the U.S. courts decide in the case against NML Capital and other funds, for US$1.5 billion.
According to what InfoBAE reported, Dall'O confirmed that "the Republic continues acting in accordance with the statement by Francisco Guillermo Eggers,” the director of the National Office of Public Credit at the Palacio de Hacienda. Before the trial judge, Thomas Griesa, Eggers had sworn that the country would abide by an eventual ruling against it, on November 16, 2012.
Then, the Court of Appeals upheld Griesa’s ruling and ordered the country to pay the vultures US$1.5 billion in principal and interest. The ruling attached the regular debt payments: If the country failed to pay, he could have attached funds from the bondholders with restructured securities. With an injunction, or stay, the appeals court left its ruling on hold until the U.S. Supreme Court finishes deciding the process. The government still has an appeal before the highest court.
But Cristina, by national broadcast, said that the country sought to overcome possible attachment with a voluntary change of jurisdiction of bonds. Those who had bonds under New York law, she said, could replace them with ones with Argentine law, out of reach of American justice. The change was subordinated to what the Supreme Court decides. With that argument, the vulture funds asked the Appeals court to lift the stay that benefits the country. Now the operation was discarded, asking the Appeals court not to lift the stay, with which the country will be safe for several more months.
Infobae
In the run-up to the elections, the government tried to send a signal of confidence to the U.S. courts
The Cabinet Chief for the Economy Ministry, Fabián Dall´O, declared under the penalty of perjury of the laws of that country, that Argentina will comply with sentences. They asked that the Appeals court not lift the measure that allows it to pay debt.
Tuesday, October 29, 2013
by: Leandro Gabin
It is not the first time that a government official has to submit a document stressing that the Argentina will abide by the decisions of the United States judiciary. It was already done on November 16, 2012, by Francisco Guillermo Eggers, director of the National Office of Public Credit for the Economy Ministry. But now, with the petition of the holdouts that the Appeals court lift the measure that has suspended the execution of the ruling (to pay 100% with the funds from upcoming maturities of debt), the government had to reaffirm that idea.
This time it fell to Fabián Gustavo Dall´O, Chief of Cabinet of advisers of the Ministry of Economy and Finance, and confidante of Minister Hernán Lorenzino.
Two days before the legislative elections, the official said "under penalty of perjury under the laws of the United States” that the Republic "continues acting in accordance with the statement from Francisco Eggers,” indicating that the country "has complied, is complying and will comply" with court judgments from U.S. courts and will "not take any action to evade the directives.”
In this way, it is the second official from the Economy Ministry to commit himself personally to American courts that there will be no maneuvers to avoid sentences. This is part of the brief that the government sent on October 25 to the Court of Appeals of New York not lift the stay, which allows the country to continue paying debt maturities.
That both Eggers and now Dall´O have put their signatures down is a risk for themselves in case the courts understand that the country wants to evade rulings. The plan which the President had enunciated with regard to paying bonds with New York law in Buenos Aires was considered by Judge Thomas Griesa as a possible contempt of court.
Although that plan was unsuccessful, the risk exists. For the officials, there is a danger of no longer bring able to enter the United States if the Executive carries out any maneuver that is understood as contempt. "If something like this happens, they cannot enter United States. They would be arrested at the airport. The statement they signed committed them, and quite a bit. This is no small thing," said a lawyer that understands these cases.
For one thing, the government again noted that they complied with the rulings, minimized alleged schemes to evade judgments (a swap to local law) and warned that if the stay is lifted, there would be a default of US$24 billion.
