Escape from New York, pari passu edition

“I’m a little nervous,” the President of Argentina told the nation on Tuesday night.

We’ll bet.

President Cristina Fernandez de Kirchner had just sent a draft law to the Argentine congress.

This would offer restructured bondholders to route around New York law into Argentina’s domestic jurisdiction, set up local payment for them in the meantime, and in general, attempt to remodel bonds free of holdout lawsuits and a default that could last a long time.

And on Wednesday the market more or less retorted that it prefers to hold the defaulted paper anyway. Read more

Ukraine, war, and sovereign default

Ukraine claimed at pixel time to have fired on a number of Russian tanks crossing its borders.

Being invaded by Russia is not very conducive to a country’s GDP. But also, bizarre as it seems if its armour really is aflame in the Donbas, Russia is also the owner of Ukrainian sovereign debt. This has some precarious terms (for the borrower) restricting growth in debt to GDP to below 60 per cent. Read more

Pari passu goes to the Peace Palace

That is, Argentina filed a case at the International Court of Justice in the Hague on Thursday — claiming that US court decisions in the pari passu saga have violated its sovereign immunity in public international law.

Note that Argentina originally waived immunity within the New York law bonds owned by the holdouts. Read more

Derivatives and public entities: don’t be a day-one loser

Banco Espirito Santo has recently, and spectacularly, shown how many sins of the past lie beneath Portuguese corporate life.

Also recently, readers of the Independent (and Matt Levine) would have come across what must be one of the most pointlessly complicated derivatives transactions ever — and also involving a Portuguese company. Read more

Nine questions for African Minerals

They come from Deutsche Bank’s analysts — who have in the meantime suspended their ‘buy’ rating on the London-listed Sierra Leone iron ore miner.

Background: a related party transaction, a director resignation, an internal investigation into $50m of shareholders’ money also paid to a related party, and a four-fifths share-price drop in a year. (And a 25 per stake held by the Shangdong Iron and Steel.) Read more

Time Warner — Rupert withdraws…

There goes an $80bn bear hug. Full statement from the 21st Century Fox chairman and chief executive:

We viewed a combination with Time Warner as a unique opportunity to bring together two great companies, each with celebrated content and brands. Our proposal had significant strategic merit and compelling financial rationale and our approach had always been friendly. However, Time Warner management and its Board refused to engage with us to explore an offer which was highly compelling. Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders. These factors, coupled with our commitment to be both disciplined in our approach to the combination and focused on delivering value for the Fox shareholders, has led us to withdraw our offer.  Read more

Investment in Argentine bond credit-linked notes ends less than perfectly

See the attached for an important announcement by the Brasil Sovereign II Fundo de Investimento de Divida Externa… (H/T Bloomberg)

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No, really — does anyone want to accelerate on Argentina?

It is getting to a week since holders of Argentina’s restructured bonds first had the opportunity to cry default and demand full and immediate payment. So we thought we’d ask.

And as Morgan Stanley’s analysts pointed out on Tuesday, there is $13bn of paper out there eligible to be accelerated — $30bn, counting cross-default clauses in debt which has not had payments missed yet. Read more

BES — the resolution

Click for the Bank of Portugal’s announcement of the resolution of Banco Espirito Santo: Read more

Argentina, default, and the prisoner’s dilemma

That was the Argentine economy minister, Axel Kicillof, shortly before pixel time, having announced a (rejected) ‘offer’ of the same terms as Argentina’s restructured debt to the holdouts; blamed Judge Griesa; and otherwise prepared his country for default. Direct negotiations, in short, are over for now. Read more

The get out of RUFO free card

Update – Midnight UK time: Argentine press was reporting at pixel time that the country’s banks may provide collateral to the holdouts for a temporary stay. Argentina would then use the stay to ask restructured bondholders to consent to waiving the RUFO clause. (Using private banks to pay the collateral would avoid a RUFO trigger.) Also at pixel time, Argentina’s economy minister had entered negotiations in New York — so something was up.

The talks may move quickly into Wednesday. But the emergency stay request in the original post below shows some of the issues here… Read more

Rearranging the ISINs on the Titanic

We are one day away from Argentina’s second default this century. Drama or farce?

Farce. For all the confusion that was on show in Judge Griesa’s hearing last week, about whether Argentina’s restructured local-law bonds should join the foreign-law debt within the pile of paper at risk…

At least holders of these bonds will be OK after all on Wednesday.

Only just this once, though. And they were let off for a reason which underlines tensions we’ve been noting in the pari passu saga between enhanced powers to enforce sovereign debt, and the complexity of international finance. Read more

Yukos — Putin’s loose lips

Was Rosneft an arm of the Russian state in 2004?

For anyone looking at its shareholder list — or the background of Igor Sechin, chairman of the board of directors at the time — back then, it might hardly seem a taxing question. But it’s not the question the arbitration tribunal saw as important in Monday’s Yukos ruling.

This was whether Rosneft was specifically acting on behalf of the state when it played its part in the dismemberment of Yukos in 2004. (State responsibility in international law is a tricky subject.)

In an astonishing passage, the tribunal is sceptical that there is evidence of Rosneft acting in this way — until it notices the reflections of the man in the Kremlin from the time… Read more

Yukos — the interest-ing bit

Another excerpt from Monday’s ruling by an arbitration tribunal, awarding $50bn to be paid by Russia to Yukos ex-shareholders…

As part of the damages from Russia’s expropriation of Yukos’ assets — the tribunal also had to work out interest. This is an important part of any arbitration case looking at financial losses incurred years ago. Although actually, there is surprisingly little guidance on what rate to choose. And the rate used by the tribunal here is (excuse the pun) interesting. Read more

Yukos — the $50bn award

Here’s how the tribunal of the Permanent Court of Arbitration worked out the figure, after finding in favour of former Yukos shareholders on Monday…

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Geopolitical central banking

What happens when you raise rates by 2.5 percentage points, within a period of six months, for an economy that might only grow 0.2 per cent this year?

We’re not sure. Read more

Exorbitant privilege, meet pari passu

With less than a fortnight until Argentina risks defaulting on its restructured debt, there will be another hearing in the pari passu saga later on Tuesday. After a look at Argentina’s position, now for what Judge Griesa’s hearing will focus on — restructured bondholders who argue that he has no jurisdiction over them…

Notably, local-law restructured bondholders. Read more

The RUFO persecution complex

“Madmen in authority, who hear voices in the air,” Keynes wrote at the end of the General Theory, “are distilling their frenzy from some academic scribbler of a few years back.”

In Argentina, the scribblers are sovereign bond contract draughtsmen. Read more

Inverting AbbVie into ǝıVqqA

Over on Lex this week we’ve been pondering the finer points of what shareholders get out of tax inversions.

So… from the text of AbbVie’s planned £32bn merger with Shire, announced on FridayRead more

Sell Rosneft, buy AK-47s

From the US Treasury’s Office of Foreign Assets Control on Wednesday:

The following transactions by U.S. persons or within the United States involving the persons listed below are hereby prohibited: transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity of these persons (listed below), their property, or their interests in property…

Note that wording carefully. “US persons” could extend beyond the US. Meanwhile “new debt of longer than 90 days maturity” could extend beyond US dollar debt.

It does not, however, include US dollar clearing generally, the US Treasury says. Nor, it seems, CDS which references prohibited underlying debt.

Now note whose debt — not all transactions; debt — US banks, US clearing systems, and US investors may be prevented from dealing with accordingly: Read more

Meanwhile, at summer camp

If Google or 21st Century Fox is interested in buying Time Warner, it’s news to Jeff Bewkes.

“I know nothing about it,” the media conglomerate’s chairman and CEO told Variety at the Allen & Co. media conference in Sun Valley, Idaho, on Wednesday when queried about reports that the two companies were eying Time Warner… Read more

Rupert’s bear hug

An $80bn scoop on Dealbook…

Fox first approached Time Warner in early June, these people said. Chase Carey, the president of Fox and a longtime top lieutenant to Mr. Murdoch, met privately with Time Warner’s chief executive, Jeff Bewkes, these people said. Later that month, Fox delivered a formal takeover proposal worth $85 in stock and cash for each Time Warner share. Read more

Markets Live: Wednesday, 16 July, 2014

Live markets commentary from FT.com 

The data keiretsu, continued

Apple and IBM’s shared vision for this partnership is to put in the hands of business professionals everywhere the unique capabilities of iPads and iPhones with a company’s knowledge, data, analytics and workflows…

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We are negotiating. You are litigating. They are going for the eyes

“The recalcitrant scum of the earth, I believe?”

“Ah, the vultures of global usury, I presume?”

To commemorate the beginning of negotiations in New York later on Monday between Argentina and Elliott… Read more

Seventy Bitcoin risks

Click to enlarge, via the European Banking Authority’s response to virtual currencies. Do note E31.

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ALL-CAPS PARI PASSU

Dear Cleary Gottlieb (Argentina’s lawyers): good luck defending this one.

From page 7 of Monday’s dead-tree FT — Argentina’s announcement that it is about to default. Naturally, given the bizarro world of the pari passu saga, this announcement is headlined ARGENTINA PAYS. Click to enlarge: Read more

Your move, Argentina

Judge Griesa has denied Argentina’s request to stay the pari passu order beyond June 30 (below).

Argentina has said that it’s deposited enough money to pay the restructured bonds on that date. Read more

Let the generational war begin

(Disclosure: the author is 27… and renting.)

From the UK Prudential Regulation Authority’s consultation paper on the loan-to-income cap… Read more

London gets a monetary policy

The PRA and the FCA should ensure that mortgage lenders do not extend more than 15% of their total number of new residential mortgages at loan to income ratios at or greater than 4.5. This recommendation applies to all lenders which extend residential mortgage lending in excess of £100 million per annum. The recommendation should be implemented as soon as is practicable.

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