Comments on: Why we might soon see another Argentine default

By: vieux_foque

vieux_foque — Sun, 25 Nov 2012 22:54:10 +0000

Somebody has convinced the government of Ghana to hold the Argentinians’ training ship in port until the money is paid. I don’t know if the US State Dept is doing this, or the hedge funders went direct to the Ghanain court, but it’s a nice ship – a trophy even – and I’m sure the Argentinians do not want to lose it. I’d watch for a nighttime exit.

By: Kaleberg

Kaleberg — Fri, 23 Nov 2012 18:47:00 +0000

Has Argentina considered trumping up some kind of felony case against EA and demanding extradition of its principals? I’ve seen weirder stuff.

By: MrRFox

MrRFox — Fri, 23 Nov 2012 14:09:48 +0000

Seems so easy – Argentina replaces BoNY with an offshore bank, pays into it funds then immediately transferred to the accounts of holders of restructured bonds – nothing happens in the US except the receipt of funds by holders – not like the court will try to any of that money away from them, is it?

By: Danielmontero

Danielmontero — Fri, 23 Nov 2012 09:06:50 +0000

“Judge Thomas Griesa, of the Southern District court in Manhattan, is mad as hell, and” you are very lucky Mr Salmon to live in the USA In Argentine you would be rigth now in jail…

By: Nameless

Nameless — Fri, 23 Nov 2012 00:37:57 +0000

Parasites, vultures or not, a contract is a contract is a contract.

By: Danielmontero

Danielmontero — Thu, 22 Nov 2012 22:52:34 +0000

I am very happy for this VICTORY OF THE JUSTICE FUNDS
Now many persons can fill AVENGED and others can have JUSTICE with Ecuador
They always speak about vultures funds,but is a real Voltures who bought before the default?That is an INVESTOR, to Argentine is not important at what price the investor pays.
The real VULTURES the banks that bought the bonds at 5 after the default and sell to Argentine at 30! But in this case Argentine dosent said anything
Or somebody thinks that in 2010 Argentine didnt know that she had already negociate a minimus?before the buyback
And in this case mention is not a VULTURE?of course is a DEPREDATOR paying 30% to the Houlders BUT they pay until the last cent to the FMI why??

By: fields

fields — Thu, 22 Nov 2012 22:17:47 +0000

Hmm – one awful mess he has created. Perhaps the real story here is we need age limits on these judges. When doctors get too old and make errors of judgement, their colleagues try to cover up for them. Maybe the appeals court will see it that way too?

By: Nameless

Nameless — Thu, 22 Nov 2012 22:08:50 +0000

“I dont’ get it. Griesa wants Argentina to pay full to the vulture hedge funds or just the same that other bond holders accepted (around 25%) ?”

100% of principal and back interest since 2001.

By: qusma

qusma — Thu, 22 Nov 2012 21:51:18 +0000

“And then there’s the biggest question of all: how on earth are countries ever meant to be able to restructure their debts, if orders like this allow holdout creditors to get paid in full?”

By not issuing foreign-law bonds in the first place, Felix. That’s the entire point of foreign-law bonds: it’s very difficult to default on them. The sovereign gives up their ability to swiftly and easily default with zero consequences, and in return gets to pay lower interest rates.

We saw the exact same thing with Greece and the PSI. The Greek government actually managed to scare some (in retrospect rather stupid) foreign-law bondholders into accepting the PSI, partly through the use of collective action clauses. But there were holdouts, and they have been paid in full and on time because Greece does not want to go through the process of defaulting on English-law bonds.

By: Anonymous

Anonymous — Thu, 22 Nov 2012 21:48:24 +0000

I dont’ get it. Griesa wants Argentina to pay full to the vulture hedge funds or just the same that other bond holders accepted (around 25%) ?

By: Nameless

Nameless — Thu, 22 Nov 2012 20:38:24 +0000

It seems that the ruling has BoNY completely boxed in. It can’t pay current bondholders unless NML is paid first, it can’t participate in any scheme to transfer its indenture trustee duties to any other entity without risking contempt charges (not sure if this is even technically possible, especially on such a short notice); nor would any other U.S. bank or entity want to become the indenture trustee, because that would automatically bring them into the scope of the ruling.

The ruling is so broad that it even covers all holders of current Argentine bonds within court’s jurisdiction. Cede & Co is named specifically. Simply accepting the interest payment is a violation of the ruling.

As to the resolution of this whole thing, if the Second Circuit does not get involved, it seems to me that BoNY has exactly one avenue left. It will accept the $3 billion payment from Argentina, pay $1.3 billion to NML and $1.7 to exchange bondholders, and ask Argentina for more money. This is not particularly unusual, though normally not practiced at these scales (think of it as a form of bank account garnishment).

Argentina may not even be too opposed to this outcome, because that’s the only way to resolve its problems while saving face and without having to repeal Law 26017. It can certainly afford to pay NML, $1.3 billion is less than 0.3% of its GDP, it probably loses more every year because it’s locked out of international financial markets.