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Going bust is painful. But when you are a country it is particularly awful.
While people and companies have recourse to established legal frameworks that govern their bankruptcies, struggling countries have to tackle debts in what is close to a legal limbo.
As a result, both countries and their creditors are uniquely vulnerable. The former have no formal bankruptcy protection that it can use for an orderly restructuring of its debts, but the latter have few ways to compel a stubborn state to heel (at least in the post-gunboat diplomacy era). The result is a delicate balance — and when it breaks down, it can lead to an unholy mess. Read more
You won’t find a certain Latin phrase anywhere on it. Still, just for the record, here’s evidence that Argentina did learn at least one thing from the pari passu saga.
Presenting the new pari passu clause, from the prospectus for the gargantuan $16.5bn bond which Argentina is issuing to pay off holdouts and place that saga behind it: Read more
It gives me greatest pleasure to announce that the 15-year pitched battle between the Republic of Argentina and Elliott Management, led by Paul E. Singer, is now well on its way to being resolved…
– Daniel Pollack, Special Master in the pari passu deal negotiations
Could it be? Is it over? Read more
By Rodrigo Olivares-Caminal, Professor in Banking and Finance Law at Queen Mary University of London and an expert and consultant in sovereign debt restructuring.
After a long hiatus, a convoluted saga gets a new cast of characters.
Although has the basic plot changed very much? Read more
Does Judge Thomas P. Griesa wish he’d never heard the words “Argentine bonds”?
Reverberations from his decision to side with holdouts have travelled from New York to Buenos Aires to the UK and now to Belgium, where it looks as though investors with restructured Argentine debt issued under English law may have had some success. Emphasis on some.
Belgian courts, by the way, have not made these decisions public, and both sides have time to appeal. But we won’t let that stop us from picking through the implications. Read more
The governments change, the debts change. The rhetoric, on the other hand…
In light of the Greek prime minister’s recent ‘humiliation’ speech and the rather heated reaction it’s had among official creditors (and private bondholders) – we thought we heard some historical echoes. So we took a quick look through the archives. Read more
Are you an EM fund manager?
Do you live in London or New York?
Were you by any chance offered some of the $1.4bn of Bonar 2024 bonds issued by Argentina on Wednesday, bought by Deutsche Bank and BBVA on Thursday, and settling this Friday? Or maybe you’d like to buy these bonds in the near future.
Then congratulations. You might well also be buying yourself a ticket to the next exciting stage of the pari passu saga.
PS: this may now involve the holdouts personally hunting you down. Read more
Could there finally be a limit to just how far around the world the pari passu saga goes?
But for a longer answer, read on. Read more
That’s the gist of the latest from Judge Thomas P. Griesa…
On Wednesday the District Court judge ordered Deutsche and JPMorgan to turf over documents on the “flow of funds” relating to an unofficial, $2bn sale they were arranging of US dollar-denominated — although not US-law — bonds (Bonars) issued by Argentina. Read more
Compare (a press release from Daniel Pollack, a court-appointed negotiator, on an Elliott offer to talk to Argentina in the pari passu mess):
The invitation by the Bondholders was without pre-conditions and offered the possibility to the Government of Argentina of a settlement without any present payment of cash, details to be negotiated. That invitation was transmitted by me to Counsel for the Government of Argentina, Cleary Gottlieb, on January 30, with follow-up calls by me over the next two weeks. The Government of Argentina has neither accepted nor otherwise responded to the invitation by the Bondholders.
Q. You are a foreign judge being pulled into one of the longest, biggest, stupidest sovereign debt cases in history, one which is presently in limbo in a US court. The debtor has become distracted by a political nervous breakdown at home and may have taken leave of reality altogether. The creditors can’t stand each other, and no one has been getting any money for months, because of the effects of a single bond clause drafted over two decades ago. How do you proceed?
Click below for the attempt of Mr Justice David Richards of the High Court of England and Wales: Read more
As the WSJ reported on Tuesday, the Russian rouble’s collapse is taking a particularly heavy toll on Belarus, Europe’s last standing autocratic economy, which remains hugely dependent on Russia to this day.
According to the report, the regime of Alexander Lukashenko has started to block independent news sites and several online-shopping outlets in an apparent attempt to prevent a bank run.
This follows an emergency rate hike by 2,6000 basis points last week.
The trouble relates to the fact that the Belarusian rouble is supposed to be pegged to the US dollar, the euro and the Russian rouble, which has understandably put pressure on its valuation. As analyst at Danske Bank explained this week: Read more
With Argentina in default, the pari passu saga has become a long, ludicrous, gruelling standoff — which plenty of financial institutions and Argentina’s restructured bondholders have been trying to escape.
And then running smack into the US court system.
On Friday the Second Circuit Court of Appeals dismissed an appeal by Citibank to get local-law, US dollar-denominated restructured bonds (the ones with the ISIN confusion) out of the pari passu embargo: Read more
“I’m a little nervous,” the President of Argentina told the nation on Tuesday night.
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
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
See the attached for an important announcement by the Brasil Sovereign II Fundo de Investimento de Divida Externa… (H/T Bloomberg)
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
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
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
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
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
“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
“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
In the Alphaville corner… 64 posts and counting of the saga:
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
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
Delivered by Cleary Gottlieb on Monday — and freshly tweeted by La Presidenta. Click to enlarge: Read more
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