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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Why the vultures aren’t the big problem

Or, why the pari passu saga’s legacy won’t be to make holdouts all-powerful in sovereign debt, a worry expressed by Martin Wolf in his latest column.

Not quite. Rather, it will make holdouts just powerful enough so that the system becomes haphazard, interminable, and frustrating for everyone, we’d argue. And that would be the real problem. Read more

Dubai — to sell

Well, we did ask. That’s the Dubai bourse down almost 8 per cent at pixel time…

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A letter to Judge Griesa

Delivered by Cleary Gottlieb on Monday — and freshly tweeted by La Presidenta. Click to enlarge: Read more

Pari passu: CDS interlude

Hat-tip to Joe Rennison at Risk.net, and Bloomberg — a mystery “CDS Holder” has asked Isda’s determinations committee to look at whether Argentina’s government could have potentially triggered CDS on the country during its confused responses to defeat at the Supreme Court last week…

The request — to extend a maturing CDS contract, hence the ‘potential’ language — centres on the economy minister’s statement last week that the judgment made paying the restructured debts “impossible”: Read more

About that Ukrainian bond Russia owns…

Russia says Ukraine hasn’t paid interest due June 20 on that $3bn eurobond.

Ukraine said on Thursday that it had. Read more

There goes the “no pasaran” plan

Here’s the order which Judge Thomas Griesa made late on Friday, forbidding Argentina from swapping its restructured bondholders from New York law to its local legislation… Read more

Sovereign debt reprofiling, take two — from the IMF

The IMF has picked its week to publish another paper on changing its sovereign debt restructuring policy…

Although the paper released on Friday — which follows an initial review last year — isn’t about Argentina, pari passu, and holdout issues. It’s about Greece. Read more

Fun with banks’ fair value (and DTAs)

Citi analysts have read 38 European banks’ annual reports for last year.

People who value their sanity are not supposed to do that. (HSBC’s 2013 report, all 590 pages of it, is pictured below.) So it’s interesting to note what Citi found. Read more

They shall not pass (but let’s try and reroute our bonds around them anyway)

We cannot allow that we are prevented from honouring our commitments to 93 per cent of bondholders. We are going to initiate a debt swap to pay the bonds in Argentina, under local legislation…

That would be Axel Kicillof, Argentina’s economy minister.

Late on Tuesday, Kicillof revealed the Argentine government’s actual plan for life after its final defeat in the pari passu case — a canje, or swap out of New York legislation into local law for its restructured debt, to avoid paying everyone (or no one) in New York as per the pari passu injunction.

If you can’t get the US courts to throw the problem out of your bonds, get your bonds away from US courts.

A flawless plan — if the US courts weren’t already furious with Argentina, and if the entities whose help the republic would need to organise a swap (lawyers, payment agents, and so on) weren’t subject to those courts. Read more