Thursday, June 19, 2014

US Supreme Court wants to unleash the vultures on Argentina

The US Supreme Court has let a lower court ruling stand which would not only create immediate problems for Argentina. It could have drastic effects on how the public bond market works for the developing world. It could also have major implications for the eurozone. It allows "vulture funds" that bought up debt on which Argentina had defaulted to claim payment on it.

Bill Black explains his view of the implications in U.S. Supreme Court Preserves Power of Finance Over Argentina The Real News 06/16/2014

Lawrence Hurley and Sarah Marsh reports on the case in Supreme Court rejects Argentina appeal in bond fight Reuters 06/16/2014:

The high court left intact lower court rulings that ordered Argentina to pay $1.33 billion to the so-called holdouts who refused 2005 and 2010 debt swaps in the wake of its catastrophic 2001-02 default on $100 billion.

This could open the door to claims from other holdouts worth as much as $15 billion, a hefty sum for a slowing economy struggling with rapidly dwindling foreign reserves. ...

Argentina has previously refused to pay up. It argues it does not have the funds and cannot give holdouts preferential treatment over exchange bondholders after many of them bought the debt at a massive discount and are claiming payback in full.

If it sticks to that position, U.S. District Judge Thomas Griesa could prevent full payment to exchange bondholders even though the country is able and willing to pay them.

This could result in a default by June 30, when payments are due on discount bonds governed by New York, further setting back Argentina's return to international capital markets. [my emphasis]

Argentine President Cristina Fernández addresses the decision in Visión 7 - Cristina: "El fallo es contrario al sistema financiero global" TV Pública argentina 16.06.2014

Text (Spanish) in La Argentina no va a defaultear su deuda reestructurada y tiene voluntad de negociación, lo que no tiene es voluntad de ser sometida a extorsión CFKArgentina 16.06.2014

Her Economics Minister Axel Kicillof also addresses it in Visión 7 - Kicillof detalló la postura argentina tras el fallo favorable a los fondos buitre TV Pública argentina 17.06.2014:

Cristina's website also carries a Presidential statement against the vulture funds' "estafa" (ripoff) El Blindaje y el Mega-Canje: la Estafa Financiera más Grande en la Historia Argentina CFKArgentina 16.06.2014.

Lawrence Hurley reported for Reuters in Argentina's fight with bondholders reaches U.S. top court 04/17/2014:

Argentina has been battling for a decade with the bondholders led by hedge funds NML Capital Ltd, a unit of billionaire Paul Singer's Elliott Management Corp, and Aurelius Capital Management. Argentina argues the funds bought most of the debt at a deep discount after the default and sought to thwart the country's efforts to restructure. Creditors holding about 93 percent of Argentina's bonds agreed to participate in two debt swaps in 2005 and 2010, accepting between 25 and 29 cents on the dollar. [my emphasis]
AC Paster, Blue Angel, Dart, and Elliot are other funds that potentially stand to benefit from the decision.

See also:

Sebastian Abrevaya, “Ponen en peligro no sólo a la Argentina” Página/12 17.06.2014: Argentina gets support from other developing nations in its stand against the vulture funds. She tells a meeting of the Group of 77+China that the Surpreme Court's ruling is a danger for the "sistema económico internacional" ("international economic system").

Un fallo de alto impacto Página/12 17.06.2014: La decisión tomada esta mañana por la Corte de EEUU sienta un precedente capaz de afectar todas las renegociaciones de deudas soberanas futuras, porque bastará que un solo acreedor no acepte una propuesta de reestructuración para dejar el conflicto abierto. ("The decision taken this morning by the US Court sets a precedent that could affect all renegociations of sovereign debt in the future, because it will be sufficient to leave the conflict open if one single creditor doesn't accept the restructing {of a debt}.") (my emphasis)

"No queda otro camino que recurrir a La Haya" Página/12 17.06.2014: Argentina has the option of appealing to the International Court of Justice in The Hague.

Christiane Henkel, Brisanter US-Gerichtsentscheid: Argentinien droht Default Neue Zürcher Zeitung 17.06.2014

CFK: "La Argentina no merece semejante extorsión" Página/12 17.06.2014

Cristina tras el fallo: "No vamos a defaultear" Tiempo/InfoNews 16.06.2014

Lo más contundente del discurso de Cristina Tiempo/InfoNews 16.06.2014

Las consecuencias del fallo Tiempo/InfoNews 16.06.2014

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