Ambito Financiero
Vulture funds: Obama will back Argentina
Monday, July 15, 2013
The government of Barack Obama is studying taking part in favor of Argentina in the litigation against the vulture funds over the public debt. So reported The Washington Post, confirming that a contingent of U.S. officials met with attorneys from Argentina and from the funds Aurelius and NML Capital.
The meeting with the lawyers was held on Friday and, according to the newspaper, included officials from the Department of Justice as well as “a dozen representatives of the Treasury” and the State Department. “A legal battle and a ten year lobby that pits a prominent Republican donor (the head of Elliott Management, Paul Singer) against the Argentine government has called the attention of the Obama administration, which could end up helping Argentina,” said the article published on the Washington Post’s website.
The Justice Department has already made filings to support the position of the Casa Rosada in other courts, concerned about the consequences that could come from an adverse ruling on the world sovereign debt market. Also, a vulture victory could bring harm in the future to the New York market as an issuer of public debt. The newspaper evaluated that the White House, through the Justice Department, could involve itself in the legal dispute “before the Supreme Court” asks it to.
The Argentine government already filed at the end of June an appeal before the U.S. Supreme Court seeking to reverse a lower court ruling. If the American state decides to make a formal request to the Supreme Court to take the case, the chances that the high court steps in would increase significantly.
Pagina/12
An ally against the vultures
The Justice Department of that country is analyzing filing a brief before the U.S. Supreme Court, where it would back the concept of sovereign immunity to try to avoid an adverse ruling against Argentina.
Monday, July 15, 2013
The United States is evaluating a more active intervention in favor of Argentina in the dispute that the government of Cristina Kirchner is maintaining with a group of vulture funds in the courts of New York. This was revealed on Friday by the Washington Post, in an article where it offered details of a meeting on that same day held by officials of Barack Obama with attorneys from both sides to take in the state of the dispute In that meeting, according to the U.S. newspaper, it came out that Obama could filed a document supporting Argentina’s position before the Supreme Court of that country, before it is asked to do so.
While the spokesman for the Justice Department, Peter Carr, avoided giving an official version of the issue, the Post cited various sources that participated in the meeting and they said that the White House is not analyzing whether to take some kind of measure within the framework of the legal battle that is entering its final round. The publication recalled also that the Justice Department already made presentations before the Court of Appeals of New York to support the position of the Casa Rosada.
Argentina in 2005 achieved the biggest sovereign debt restructuring in history, but a group of vulture funds that bought debt in default at auction prices refused to accept a haircut and is pressing in court to collect 100%. Elliott, NML Capital, Dart, Aurelius, AC Paster and Blue Angel are those suing an have already obtained favorable rulings in lower courts. Obama fears that Argentina’s appeals will not succeed and that could put all future debt restructurings at risk. With this precedent, it would be enough for one creditors to not accept for an entire negotiation to fail.
“A legal and lobbying battle of 10 years that pits a prominent Republican campaign donor (Paul Singer, head of Elliott) against Argentina has gotten the attention of the Obama administration, which could favor Argentina,” said the Washington Post article. “The Obama administration must decide if it backs a foreign government against a group of American vulture funds and other investors, who bought Argentine debt, part of which was obtained with a heavy discount after the country entered into default in 2002,” it reports and it confirmed that on Friday U.S. officials from the Justice and Treasury departments met with attorneys to return to listen to arguments before making a decision. “The Department is now evaluating filing a brief a before the Supreme Court, focusing on defending the concept of sovereign immunity,” according to the Washington Post.
Pagina/12
Fight against the vultures
The legal dispute with highly speculative investment funds called vultures has various fronts. In Europe, Argentina is obtaining favorable rulings, but the most important one is pending the New York appeals court.
Monday, July 15, 2013
by Cristian Carrillo
In the run-up to the final decision in the Court of Appeals in New York about the dispute that Argentina faces against the vulture funds over their complaint on debt in default for some U$1.33 billion, various other rulings have come out in courts around the world that strengthen the country’s arguments. The high court of Germany rejected the complaint of a bondholder that tried to use the same arguments that Paul Singer is using, of NML Capital, who is leading the vulture lawsuit, about alleged discrimination in the payment of debt commitments by the country among those that entered the exchange and those the preferred to continue suing. The New York court remains without a ruling on the underlying question – whether or not there is discrimination. The Court of Appeals of Belgium found that the bank accounts for diplomatic use has “special immunity” which a country can only renounce in an express manner.
The expectation around the litigation with the vulture funds transcends Argentina’s borders, due to the negative impact that a favorable ruling for these groups can have on future debt restructurings and the normal functioning of the mechanisms of debt payments among countries. The Monetary Fund warned that the Argentine case “is beginning to have repercussions in other restructuring processes.” “What country could make an offer with a haircut, reduction of interest and extension of payment periods to straighten out its financial situation and recover a process of economic growth and employment if the court finds that the vultures should collect everything in case and in one payment,” the IMF report asks.
The scenarios that are presented for the country are summarized by three: the New York court could determine that a cash payment be made to the vulture funds and Argentine accounts are attached at the Bank of New York (BoNY); payment without attachment; or that it accepts the government’s proposal to reopen a new stage of the restructuring. This last option is the one that complies with the principle of equality between the bondholders that is proposed by the Argentine lawyers, as any improvement that the speculative funds receive would be complained about by those who accepted the exchange conditions. In that direction, the principle of equality should outweigh the complaint of pari passu – equality of treatment among creditors – in which the vulture funds wrap themselves.
The judges still must decide the payment formula for the claim on US$1.33 billion, in a way that does not discriminate against those that entered the swap nor put at risk the functioning of the international financial system. The options of one cash payment and attachment of the funds destined to the compliance with the bondholders of restructured debt are those that these days new rejections were added. The Belgian Court of Appeals applied the reasoning of the ruling of the Supreme Court recognizing the arguments developed by Argentina against the stand of NML Capital: the lifting of the attachment “would constitute a violation of its rights” under the European Convention of Human Rights. That high court argued that the vulture fund of Paul Singer obtained numerous attachments and that already counts on alternative means to protect its rights.
Economy Minister Hernán Lorenzino recalled that the U.S. Supreme Court was asked to take up the underlying issue: equal treatment. “If the court accepts taking up the underlying case, about the violation of pari passu, and sides with the country, the vulture complaint falls, the lawsuit that is in court becomes abstract,” said the minister. About this point, on Thursday the German court rejected a retail bondholder’s complaint under the argument of discrimination between bondholders. The vulture funds that are suing Argentina have greater lobby power in Washington through the financing of political campaigns, which could turn out treatment different than in Germany.
Telam
Argentina and the vulture funds: the legal turns of the ‘lawsuit of the century’
Monday, July 15, 2013
by Mara Laudonia
The actors on the international financial market are waiting with high expectations for the ruling from the Court of Appeals in Manhattan about the mechanism of payment in the lawsuit that Argentina faces against the vulture funds on warrants in default, while it is assumed that the judicial question will take time since, no matter the decision, either party will appeal the measure.
The crux of the debate is the sentence of Judge Thomas Griesa that on October 26 found that Argentina violated equal treatment to the creditors – pari passu – by having paid the exchange bondholders with a discount, and not the holdouts that are asking 100%.
The expected judicial order, as such, will decide if the bondholders of the exchange, the third parties affected in the dispute between the country and the vulture funds, finally could continue or not continue receiving payments from Argentina via the Bank of New York.
In this last case it would be the most drastic, and will oblige the government to change the routes of payment, if it upholds its decision to continue paying the holders that entered the swap.
Those in government are standing guard, but they are taking in the process calmly: on one side, they estimate that in an adverse ruling situation for the country, which upholds the method of payment from Judge Thomas Griesa, the court would grant a “stay” to the sovereign, an injunction that will impede the execution of the sentence until the case is decided before the Supreme Court.
On the other side, the possibility is not ruled out that the court finally opts to wait for the verdict of the Supreme Court, around the appeal that Argentina already filed in June, on the October 26 ruling.
Today’s situation is that nobody knows the precise science on what could occur and when: it’s summer in New York, but there is no judicial holiday calendar, despite the judges always taking vacations.
However, in August the change in secretaries happens in August, in total for this case there are nine (three for each judge on the panel), who will be replaced by other interns.
So, there are those that venture that it will be likely that the court rules before the end of July, before the change in clerks, while still with this scenario the unfolding of the case will require months, as the parties will have the option to appeal.
Others, in turn, speculate around if the court took all this time since last November to uphold or reject the method of payment from Griesa (to pay the vulture funds with money from the bondholders from the swap and to involve intermediary entities), could punt the ball and wait directly for the Supreme Court’s verdict.
Before that, the high court must analyze if it takes the case or not, which historically does not happen before October.
If the Supreme Court takes it, and then accepts the Argentine position that the country didn’t violate equal treatment for the creditors, the court could opt to continue with the court order.
Economy Minister Hernan Lorenzino already indicated as much this week in statements to the press: “If the Supreme Court accepts taking the underlying case about the violation of pari passu and sides with the country, the complaint from the vultures falls, the lawsuit that is in course becomes abstract,” the official said in radio statements.
Lastly, one mustn’t lose sight of what is happening in Europe. A ruling in Germany dismissed a complaint from a German bondholder that Argentina violated “pari passu” – the same grounds of the U.S. vulture fund lawsuit.
In Belgium, European bondholders from the swap asked for protection from the Belgian court with the argument that, if Griesa’s ruling succeeds, it will violate the principle that no court of any country can oblige others to abstain from actions in other states regulated by other laws.
The Belgian court took not put rejected the complaint because it didn’t find it prudent to get ahead of a ruling that is still not upheld by the appeals court, nor in execution, by which the underlying question was stayed.
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