Posts tagged 'Sovereign Debt'

Guest post: Ukraine’s debt — now comes the interesting bit

When your creditor takes some of your territory — can you make that territory take some of your debt? Mitu Gulati, a law professor at Duke University, last wrote for us on Russia’s $3bn Ukrainian bond. With Russia reinforcing its annexation of Crimea, Mitu considers Ukraine’s options with its debt after the secession.

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Guest post: Mr Putin’s clever bond issue

What to do when your creditor invades? Beyond its occupation of Crimea, Russia remains a lender to Ukraine — even as IMF teams ponder the Kiev government’s financial sustainability. Mitu Gulati, a law professor at Duke University, considers both sovereigns’ options.

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So long, Ukraine $1,984,838,000 5.00 per cent Notes due 2015

Notwithstanding the approval and publication by the Central Bank of Ireland of the prospectus dated 17 February 2014 in relation to the undermentioned proposed issue of securities, the Issuer hereby confirms that no such securities will be issued.

UKRAINE REPRESENTED BY THE MINISTER OF FINANCE OF UKRAINE Read more

Ukraine $1,984,838,000 5.00 per cent Notes due 2015 — and the burning tyres therein

Moscow doesn’t send tanks into revolting former vassals any more. It sends dollars.

For anyone who decides to follow the money when it comes to Ukraine’s split between the EU and Russia, the consequences can sometimes be grimly surreal when it gets to the prosaic matters of bond finance. Read more

The €1,000,000,000,000 question

Just how much would tickets go for at a German Constitutional Court hearing into any future quantitative easing programme by eurozone central banks… if a €1tn programme could easily buy a fifth of German bonds in a year?

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How Scotland really lost sterling union

This post is just to flesh out a point in this great piece by John McDermott — so read that first.

But we think it’s an important point. An alternative title for this post: What’s under your gilt?

After all, it is the debt that has enabled Her Majesty’s government to turn so breezily confident that currency union with an independent Scotland “is not going to happen”, fully seven months before an independence referendum. Read more

The OMT — um, what does this thing do again? A Bundesverfassungsgericht guide

Arguably, none of the below matters now.

That’s the prime effect of the German constitutional court turning to the European Court of Justice for a ruling on whether the ECB’s sovereign bond-buying programme is a “structurally significant transgression of powers” under European treaty law.

Big words. But the backing of the Bundesverfassungsgericht judges (pictured right) for that view gets rendered into just another opinion, pending the ECJ’s decision. And the arc of the ECJ’s justice is long, turgidly written, but ultimately quite friendly to pieces of bailout architecture that have an odd relationship to the treaties — as in past musings on the ESM.

But the really interesting thing is that regardless, the OMT’s purpose apparently remains almost completely lost on the court. Read more

How to translate “QE” into German

First, rewrite history (as Aufhebung). Read more

The Tortus sell is Portugal

Those rascal short sellers are at it again, daring to ask awkward questions of the European project. This time the manifesto comes from New York based Tortus, who have a plan to “rehabilitate” Portugal. (H/T @Pawelmorski and @IyerC).

Before rehabilitation, however, there must come acceptance, and Tortus is short “certain Portugese sovereign bonds” because it does not think the status quo is sustainable. Read more

Eurozone sovereign convergence redux?

Just to put an already-huge year-end move in Portuguese bond yields into some wider context…

Here’s a chart (via Reuters) of the five-year yield since August 2010 — to which levels it’s now, roughly, returned. Click to enlarge.

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Bondholder Hypo-thermia, in Austria

These are some mountains in Carinthia, Austria. Bucolic.

That, meanwhile, is the logo of Hypo Alpe Adria, a regional lender rescued by the Austrian government in 2009, and which has now sprung another, €800m black hole… and it is just possible that the name is going to be as memorable as Amagerbanken or SNS Reaal for European banks’ bondholders. Potentially it may be a less than bucolic precedent for sovereign debt, too. Read more

In the loop

A useful chart from Citi on Thursday morning (which you may click to enlarge), on the recent rise in bank holdings of sovereign debt. Read more

Back to the future with pari passu

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

Look ma, no uniquely recalcitrant sovereign

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

So, Australia has a debt ceiling too

Noted simply because we didn’t know it existed before:

COMMONWEALTH INSCRIBED STOCK ACT 1911 – SECT 5

Limit on stock and securities on issue

(1) The total face value of stock and securities on issue under this Act and the Loans Securities Act 1919 at any time must not exceed $300 billion

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Extremely cheap shots, House recalcitrance edition

Here’s a list of the 144 Nays on last night’s House debt ceiling vote (so implicitly, then, 144 votes to find out how long the US could have gone before defaulting). Click to enlarge.

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Stay, go, pay, pari passu

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

The intrinsic (intractable?) bank bid for sovereign debt

There are a few ways to greet the news that eurozone banks are more exposed to their sovereigns than ever. One’s to note that this just means more human shields to deal with (somehow) in a restructuring… Read more

Argentina tries to settle with holdouts. Not those ones though.

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

Imagine the Fed bought defaulted Treasuries

Every Federal reserve bank shall have power…

…To buy and sell in the open market, under the direction and regulations of the Federal Open Market Committee, any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States.

Section 14.2(b)2, Federal Reserve Act

Now, reading that carefully

Does that mean the Fed can’t buy defaulted US government debt? Read more

Are T-bills cash, or aren’t they?

This is what a real T-bill crisis looks like. Just so we’re clear.

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Breaking the full faith and credit, vs breaking the buck

Just for the record, FT Alphaville thinks of ‘technical’ default as one of those weasel words.

Still, some interesting comment from Fitch on Wednesday, on whether defaulted US Treasuries could still call the $2.694trn money market fund industry a home: Read more

Swap ye not Argentine bonds

IT IS HEREBY…

DECLARED that for the avoidance of doubt (i) the implementation of the plan to allow Exchange Bonds to be exchanged for securities or similar instruments payable in Argentina, which was announced by President Fernandez de Kirchner in her speech of August 26, 2013, (ii) implementation of any functionally equivalent or reasonably similar plan, or (iii) any step towards implementing (including without limitation the formulation or design of) such a plan or a functionally equivalent or reasonably similar plan, each would violate the Anti­ Evasion Injunction of the March 5 Order and Paragraph 2 of this ORDER…

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Dates for the pari passu diary

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

Argentine roulette

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

Argentina’s pari passu upset — redux

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

Floating Treasuries, finally

If you really, really want to see the US Treasury’s final rule on its issue of floating rate notes (from the beginning of next year, using 13-week T-bills as a reference rate) — here.

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France sallies forth into pari passu case, shows more esprit than Washington surrender monkeys

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

The IMF won’t be Argentina’s pari passu frenemy. Why?

Did you hear the one about the IMF sending an amicus curiae brief to the highest court in the United States in favour of taking up the pari passu case of its infamous lost cause, Argentina?

Well here’s the punchline: US opposition has abruptly killed the plan. Read more

The foreign-law distinction, Egypt and the emirate edition

There’s one thing about how the Qataris have gone about protecting their $5.5bn or so lending in Egypt — and it’s a small thing, next to a coup d’etat, the swift exit of the chap they’d bet on, and a looming balance of payments crisis…

But it’s a familiar thing:

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