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
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
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
And yet somehow — we sense the pari passu saga isn’t over yet.
This would be despite the completeness of Argentina’s defeat in the sovereign debt trial of the century… Read more
Later on Thursday, the US Supreme Court may decide whether to accept or reject Argentina’s pari passu case. Rejection could mean a swift end to the saga. Argentina would be left to decide whether to comply with paying bond holdouts alongside its restructured debt, or defaulting on both, or settling with the holdouts.
It’s always possible however that the court decides another day, or just asks the US Solicitor General to advise. That can take months. Hey. It’s the pari passu saga. (Update: no decision after all from the court on Thursday, it seems.)
Still, this is a moment for the enforcement of sovereign debt, supposedly the least enforceable of financial instruments. That’s a fascinating subject in itself. In fact we argued in a paper forthcoming in the Capital Markets Law Journal that the origins of pari passu may lie in enforcement. What pari passu ‘means’ in sovereign debt may not matter so much as its use.
We wrote it as one of many responses to Mitu Gulati and Benjamin Chabot’s great study of one possible origin for pari passu, in a Mexican bond of the 1840s, the ‘Black Eagle’. We’ve placed an expanded and version below. Warning, it’s 2,500 words and is in an academic style. But we hope it’s some context for the saga… Read more
On Thursday, we reported on a memo by Cleary Gottlieb, lawyers to Argentina in sovereign debt matters.
The memo suggested that the “best option” for its client would be to default upon its restructured bonds — then to immediately reroute their payments beyond the reach of US courts — should the US Supreme Court decline in the coming weeks to review an order requiring holdouts to be paid too. (Update: full memo here, as a Word doc.)
Which is rather extraordinary advice. The memo also emerged in the week Argentina supposedly showed good faith to the Paris Club. (And in fairness, the memo also considers settling with holdouts).
On Friday, the holdouts’ lawyers beat a path to the courthouse. Read more
Argentina made a deal with the Paris Club on Thursday. A mere 13 years after defaulting on them.
The scheme offers a framework for a sustainable and definitive solution to the question of arrears due by the Argentine Republic to Paris Club creditors, covering a total stock of arrears of USD 9.7 billion, as of 30 April 2014. It provides a flexible structure for clearance of arrears within five years including a minimum of USD 1150 million to be paid by May 2015, the following payment being due in May 2016…
And yes, this means something to the pari passu saga.
It means that a deal with holdouts is a matter of time. Read more
This year’s IMF-World Bank Spring Meeting is likely to include discussion of proposals to change the fund’s policy on sovereign debt restructuring. Gabriel Sterne, senior economist at Exotix with IMF experience, and Charles Blitzer, Principal at Blitzer Consulting and a former IMF staff member, argue in favour of a case-by-case approach.
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Ah, spring: a season of renewal. The scent of flowers carried on a gentle breeze.
And the international financial community can go back to arguing all over again about whether a promise which Argentina made in a bond issued twenty years ago – to treat creditors equally – will end up making sovereign debt restructuring harder to achieve. Read more
Typical — you take off as the risk on Spanish bonds fades… only to get sold off as Argentina implodes. Read more
Article 5 — In the event of operations involving amounts that meet or exceed THREE HUNDRED AND FIFTY THOUSAND PESOS, registration managers should define a user profile, which will be based on information and documentation relating to the economic, household, financial and tax situation, and will require supporting evidence or information which proves the origin of funds.
That’s FT Alphaville’s (very rough) translation of Disposición 446/2013 from the Argentine government. H/T Bloomberg. It’s about buying expensive cars. Read more
Wait a minute, Doc. Ah… Are you telling me that you built a time machine… out of a sovereign bond contract?
– Marty McFly (paraphrased)
Imagine the next place to come under the new era of enforcing sovereign debt isn’t Argentina, or in the Caribbean, or even a future eurozone crisis. Imagine something… older. Much older. Read more
Exciting. There’s now a whiff of political glasnost surrounding Argentina’s pari passu saga.
Or not exciting. The saga might just get two years of a lame-duck president waiting to pass the holdout problem onto the next occupant of the Casa Rosada. (The Second Circuit also denied requests to lift the stay on the order for Argentina to pay holdouts on Friday, so we know the litigation is going to go on a bit longer.)
But that makes it all the more interesting to reconsider those recent, rather odd, whispers of a plan for Argentina’s restructured bondholders to go around the sovereign that really, really doesn’t want to pay — and make a deal for Elliott and co to go away themselves, dropping the demand of ratable payment from the Republic. Read more
In which, regardless of recent calls on Argentina to negotiate on an amount to pay its holdouts in the pari passu case (or is it to give those calls teeth?)…
…Ted Olson, NML Capital’s lawyer, invites the Second Circuit to unfreeze an order to pay the holdouts ratably — and in full, by the terms of their defaulted bonds — at the next payment to restructured bondholders. Click for the doc. Read more
Beyond the Supreme Court, Judge Griesa, and Elliott Associates’ own (rather remarkable) media offensive telling Argentina to talk before the pari passu screws turn…
It comes down to the Republic’s own incentives to settle. Especially when it’s been such a “uniquely recalcitrant” debtor for so long.
And so — while it might seem a long way from the pari passu saga — we’re interested in this week’s news (via Ambito) that Argentina wants to pay $500m (in bonds) to settle with five companies and get them to stop suing it through ICSID, the World Bank’s investment arbitration tribunal…
Change in the air? Change which might spread to NML v Argentina? Read more
From the Orders of the Supreme Court on October 7:
This is a defeat for Argentina. Any legal setback is. But it’s also perhaps not the end of the prospect (however distant) of Justices Scalia, Ginsburg et al debating the pari passu saga. Read more
The FTSE index people at the LSE on Tuesday published their annual review of country classifications. There were no actual movements between the categories — Developed, Advanced Emerging, Secondary Emerging and Frontier — although two countries have joined the FTSE watch list:
Ukraine has been thrown off the list completely and is no longer being considered as a possible Frontier entrant. Too many problems with regulatory oversight and capital controls, it seems. Read more
This comes via Shearman & Sterling, in their note on Argentina’s crunching defeat at the Second Circuit (and its Supreme Court litigation options for avoiding paying holdouts alongside current restructured bondholders, which it might have just blown up)…
Emphasis on ‘illustrative’. This is a case where an appeals court ruling has just landed about four months after it was first described as ‘imminent’. Read more
They did it! They finally did it, post-Second Circuit fiasco:
[Bloomberg] Argentina will send a bill to Congress tomorrow [August 27] to reopen a debt restructuring for those creditors who haven’t accepted previous swaps after the nation’s 2001 default, said President Cristina Fernandez de Kirchner…
She also said that holders of restructured bonds, who accepted discounts of as much as 70 percent, will be able to swap them into securities governed by Argentine law in a bid to prevent payment disruptions from a U.S. court ruling in favor of the holdouts.
We first looked at the why and how of using a local-law swap to get round the pari passu problem which Argentina has made for itself — back in November. That’s how interminable this pari passu saga has been.
Much more in CFK’s speech. Come for the baldly disingenuous assertion that calling Argentina a “uniquely recalcitrant” debtor is “un poco injusto”; stay for confirmation that the new bonds would be paid through Caja de Valores, the local clearing house. Surely it’s not about showing credibility to the Supreme Court by reopening the swap to holdouts: the actual plaintiffs won’t take the offer, and the judges haven’t considered Argentina’s petition directly yet.
FT Alphaville’s considered take on all this? It’s pretty nuts. Read more
Got a problem with Argentina being made to pay holdouts alongside its restructured bondholders?
Reckon it might happen to your sovereign (even if Argentina is apparently a “uniquely recalcitrant” debtor) and screw up its next debt restructuring?
Deal with it, says the Second Circuit of the United States Court of Appeals: Read more
Quelle blague with the pari passu saga, sometimes.
You go to all this effort to scare off the IMF from so much as bleating some tame reservations to the Supreme Court about how a ratable payment of holdouts by Argentina might hurt global ‘policy’ on sovereign debt restructuring. Despite ‘policy’ being something many expected the fund to look at.
Then you watch the French swoop in anyway. And they’re much fiercer than the IMF was going to be. Read more