In two months, negotiations between the bondholders and the holdouts begin for lifting the lawsuits
The investment fund seeks to convince all the holders of Argentine debt to give up 20% of interest to those who have claims to avoid default
Wednesday, October 30, 2013
The private negotiation being brought forward by a group of creditors led by the investment fund Gramercy for trying to convince the vulture funds to drop their lawsuits will begin in two months, said a source linked to the operation. The bondholders intend to give up part of the money owed them on interest from their restructured bonds to the holdouts to make the Argentine government’s swap reopening offer more juicy.
That is the time it will take Gramercy to put together the Argentine debt holding funds to coordinate the joint strategy, said the informant. Then, a negotiating committee will be formed to try to convince the holdouts.
The operation consists of the bondholders giving up 20% of the interest in the coming give years for making up a kind of common fund to pay those who didn’t enter the swaps. The fund could satisfy holders of bonds in default for some US$6 billion, which could perceive up to US$17 billion if the ruling in favor of NML Capital is repeated.
The logic is that this way, a default would be avoided and bonds will increase in value, by which the holders will gain more than they gave up to the vulture funds.
The government is aware of the operation and gave Gramercy a free path, while the negotiations are presented as eventual agreements between private parties.
That offer would have a real value of US$1 billion, to split among all the holdouts. And it would be added to the offer of the swap, 60 cents for every dollar in default. The offer, however, would be far from what the U.S. courts ruled should be collected by the group of litigants led by NML Capital, of Paul Singer, and which comes to US$1.5 billion between principal and interest.
Gramercy seeks to gather all the bondholders for them to cede part of their future collections. At a minimum, they must reach 85% of the holders of restructured debt. “If they are not all there, it doesn’t go forward,” said one of the negotiators.
But an important bondholder is opposed and could block the operation. It is Mexican David Martinez, of Fintech. Martinez, owner of 40% of Cablevision, is suing Singer and is not ready to negotiate with the American. While there are contacts between Gramercy and Fintech to come together on positions, the Mexican “is not entering”, said a source familiar with the operation.