Friday, December 28th 2012 - 08:08 UTC

Defaulted bonds: Argentina makes its case before the New York Appeals court

Argentina will be making a presentation before the US Court of Appeals for the second circuit, in Manhattan on Friday regarding Federal Judge Thomas Griesa recent ruling that Argentine defaulted bondholders must be paid simultaneously with those who accepted the restructured bonds.

The second circuit US Court of Appeals should come to a final decision in late February

The demand from the hedge funds or ‘vulture funds’ as the Argentine government calls them, involves 1.3 billion dollars and apparently Argentina will state that it is willing to reopen the debt restructuring process by temporarily suspending the so called Clamp Law.

According to the Buenos Aires financial media the terms of such a proposal were being discussed by officials from the administration of President Cristina Fernandez and the solicitors firm in New York, Cleary Gottlieb Steen & Hamilton.

Under the terms of the presentation Argentina would allow a new bonds’ swap although in conditions less favourable than those in the previous two occasions in 2005 and 2010 which completed a restructuring of 93% of the total 2001 defaulted debt.

This way Argentina will try to neutralize Judge Griesa ruling that creditors were not treated in equal conditions (the pari passu clause) and thus ordered a full payment of the 1.3bn dollars demanded by the hedge funds.

Following a first appeal from Argentina the Appeals Court suspended Judge Griesa’ decision which allowed the government of Cristina Fernandez to pay the restructured bond holders 3.5bn dollar according to schedule and no fears of impounding.

The US Appeals Court is now expected to listen to the hedge funds presentation on 25 January, while Argentina has a chance to reply on February first and finally the two sides meet in court on February 27.

The bondholder group, which includes Brevan Howard Asset Management LLP and AllianceBernstein LP, said in a court filing that interpretation by the New York state Court of Appeals is needed to determine whether Argentina must make payments on defaulted bonds when it pays holders of restructured debt.

The reading of the so-called pari passu clause also has “enormous consequences” for New York’s financial services industry, the bondholders said in the filing on Thursday with the US Court of Appeals in Manhattan.

“Simply put, if the existing interpretation of the pari passu clause in this appeal stands, sovereigns and other issuers will at least think twice before using the law, legal system and financial services of New York, and may well choose to do business in other financial centres such as London or Singapore” the group said.


26 comments Feed

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1 andy65 (#) Dec 28th, 2012 - 11:54 am Report abuse
Pay your debts like everyone else then the problem goes away.
2 Anbar (#) Dec 28th, 2012 - 12:07 pm Report abuse
Another case that Argentina will win by proxy.

There's far too much political and economic pressure on the courts to make a judgement that will be 'en passant' in favour of Argentina.

There's this huge background fight between New York, London, Berlin and a couple of Far East locations over where to do business like this: anything that threatens that business (like european banking regulations f.ex) gets the might of the local politicians against it.

Whilst by no means acting in favour of Argentina as a modus operandi the results will be the same: a judgement that favours the Argentine position.

victory by proxy ensues.

(I was correct about the Libertad and I'll put money on this also - just bear in mind that it will also need to go the full length of appeals etc, so its going to run for a long time.)
3 Captain Poppy (#) Dec 28th, 2012 - 01:03 pm Report abuse
The reading of the so-called pari passu clause also has “enormous consequences” for New York’s financial services industry, the bondholders said in the filing on Thursday with the US Court of Appeals in Manhattan.

All this will mean that responsible nations will not have that clause, and most do not anymore, in any new loans documents. Any ruling on this will specifically be applied to this clause and not all loans taken out by a sovereign nation. Argentina is still playing chicken little and the sky will fall if they are made to pay.
4 Steve-33-uk (#) Dec 28th, 2012 - 04:57 pm Report abuse
'Skepticism in Washington with the position Argentina - It was at a presentation of the holdout they did yesterday in U.S. They say the country has the resources to pay.'
5 Captain Poppy (#) Dec 28th, 2012 - 06:30 pm Report abuse
To allow Argentina a win in this lawsuit tells the world that :
1-Contracts are meaningless
2-World bond markets are ok to collapse
3-debtor nations do not have to pay back their debt, a very back message to the world.
6 British_Kirchnerist (#) Dec 28th, 2012 - 07:56 pm Report abuse
“3-debtor nations do not have to pay back their debt, a very back message to the world”

Something humanitarians have been campaigning for for a long time, well at least in cases of vulture victimisation like in Africa and now Argentina. Good luck to the Argie team, fighting for a fairer world...
7 Conorworld (#) Dec 28th, 2012 - 09:09 pm Report abuse
Sometimes countries can't pay back their debt. Argentina was quite right to restructure its debts and it has a strong case on its hands. I just hope this time they don't go in to the court like some angry mob, sneering contemptuously at the courts and act like adults.
8 Captain Poppy (#) Dec 28th, 2012 - 09:15 pm Report abuse
If Argentina wins in this case, I see the bond market seizing to exist for developing nations and countries like argentina. That being said I am not so convinced that developing nations want to be excluded from the ability to borrow.
9 Xect (#) Dec 28th, 2012 - 11:30 pm Report abuse
'Argentina fighting for a fairer world!' BWHAHAHAHAH

Now I know for sure you're trolling the forums.
10 Captain Poppy (#) Dec 29th, 2012 - 02:13 am Report abuse
Maybe the so called humanitarians should be loaning the money then rather than much did you give BK?
11 lsolde (#) Dec 29th, 2012 - 09:32 am Report abuse
Even you, B_K, must realise that your comment was ridiculous.
Stop crying, Argentina & pay your debts.
We all have to, why should you be exempt?
Maybe l'll just try to get a full tank of petrol, then argue with the owner of the petrol station in the hope of not paying for it!
How do you think he'll feel? How could l live with the shame?
Just pay up.
lf you know that you cannot pay, then do not borrow in the first place.
12 Shed-time (#) Dec 29th, 2012 - 04:29 pm Report abuse
Argentina has the ability to pay in full the amount they owe. They refuse to do so, because they have no ethical or moral backbone. Instead they choose to line the pockets of their autocratic head of state and her obese son.

They will, however, win this court case simply because of pressure from NYC and the White House.

13 British_Kirchnerist (#) Dec 29th, 2012 - 06:42 pm Report abuse
#12 If they're as bad as you say, and as pariah as you say, why are NYC and the White House putting pressure on their behalf?!
14 Shed-time (#) Dec 29th, 2012 - 07:27 pm Report abuse
@13 because they would be protecting their financial centre to allow 'curiously corrupt' economies to still do business there and for hedge funds to buy financial products that 'bet' on their obvious demise. They don't want all this dodgy money going to London because then they cannot order some British banks to give them £2bil whenever they run short of cash, pretending American banks don't do money laundry.

However weird this system is, it's delivered significantly less economic and educational poverty than 'Marxism' which has never delivered anything beyond death and misery.
15 Captain Poppy (#) Dec 29th, 2012 - 09:45 pm Report abuse
Let's not turn this in a work of fiction. #13 can you show me where my government and NYC is “pressuring”, and I am not sure who there are pressuring?
#14 FYI US did in fact levy a 1.9 billion dollar fine against HSBC , a British based bank. In fact the USA can levy fines against any foreign or domestic entities doing business in their country just an=s any government in the world can do that. Curiously corrupt is a term that may be over kill, excessively greedy, at least for me fits better.
16 British_Kirchnerist (#) Dec 29th, 2012 - 09:53 pm Report abuse
#14 Well at least Cristina's Argentina plays the system to it own people's advantage, and exploits the real options it has (move to London if US don't play nice, in your summary). We in Europe on the other hand seem to be terrified and paralysed slaves of the “markets” =(
17 Captain Poppy (#) Dec 30th, 2012 - 12:16 am Report abuse
lol way too much rotflmao
18 Shed-time (#) Dec 30th, 2012 - 01:43 pm Report abuse
@10 If I was a scotsman, I would say, 'Kann eye ave a fryyed kake, az eyem too lazyy too workk inn theee privvvate sectorrr'.

Roughly translated into English, this means 'you're talking out of your hat, and you clearly know little about economics'.

@15 Like you suggested, I cannot deny that the USA seems to be using British companies like some kind of ATM or cash cow.
19 Captain Poppy (#) Dec 30th, 2012 - 05:27 pm Report abuse
#18 you said it all in your response to # 10. Apparently you imply the collusion is legal in the UK......somehow I doubt that. Then again if HSBC doesn't like being fined for money laundering and rate collusion, they always have the option to get out of the USA market. No one invited them.....right? Oh and na fine is also being assessed in the UK for the libor collusion. Personally I would have preferred to have held the BoD and executive management criminally responsible as they do with American businesses.
20 Shed-time (#) Dec 30th, 2012 - 09:04 pm Report abuse
@18 My point was simply that collusion took place within the US banks by the selling of ninja-mortgages which were packaged as AAA, rather than their correct ratings. The collusion was endemic within the US financial system, and let's face it, most of them still have their jobs and the US banks and rating agencies involved have hardly been chastised in any way. If you're telling me that US banks haven't been involved in money laundering, in Vegas for example or Mexico, then I'd be very very surprised.

The fact is NYC sees London as a direct threat, especially during these times of financial peril, hence their attempts to drain the coffers. I would also agree that many of these people are criminals and should be charged. Why haven't they?

I cannot for the life of me understand why they have not (ed. because MPs and such go and work for them after their time in office).
21 Captain Poppy (#) Dec 31st, 2012 - 12:05 am Report abuse
Ok I see your point now. American banks sell ninja mortgages and UK bankers launder for dug dealers and predetermine Libor rates via collusion. Your are correct.....your banks are holier.
22 Shed-time (#) Dec 31st, 2012 - 08:20 am Report abuse
@21 I said nothing of the sort. I was simply indicating that American banks and rating agencies do not seem to have been chastised in any way following the selling of these crypto-unsellable financial products.

Obvious use of the UK banks and Businesses as a cash cow is obvious.
23 British_Kirchnerist (#) Dec 31st, 2012 - 12:17 pm Report abuse
#22 Wow we might actually agree on something. Or is that because my econmic knowledge is abysmal? =)
24 Captain Poppy (#) Dec 31st, 2012 - 12:54 pm Report abuse
Ahhh yes, yes, us colonies don't seem to have it together you you boys other the the great salt pond. FSA also fined them just a tad under 60 million pounds.........they must have gone into their golden bathrooms and paid that with what they wipe their asses with and laughed on the way out.
If you can't criminally charge them.......burn their pockets. You seem to think this is a US and or UK issue and it's's a greed issue that no country in the world is adressing. Oh....and when was the last time you visited Argentina shed time?
25 Pirat-Hunter (#) Dec 31st, 2012 - 07:39 pm Report abuse
If the US courts keep this up there will be less natural resources going from Argentina to US and less flow of dollars in latin America, This could be good for the local economy in latin America but bad for the rest of the world and US currency. Spain started something like this a few month ago culminating with the reinstating of imports of Argentine biofuel back into spain, not without first landing themselves in the grip of WTO rules and turning the Spanish economy into another modern disaster. If Argentina could prolong the confrontations and concentrate in the economic policies, all this vultures will soon realize that they can only slow down progress. VIVA CRISTINA!
26 Captain Poppy (#) Dec 31st, 2012 - 11:08 pm Report abuse
Argentina ranks #50 as a importer to the USA. The only “natural resource” as barely 1 billion in mineral oil and 3oo million in aluminum. Really alex, cutting off that type of natural resource is going to be catastrophic to the USA?

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