Lee Buchheit, Cleary Gottlieb's lawyer who is defending Argentina and also handles the Greek case, acknowledged that "with the Argentine case we can say that the creditors found a theory that gives them power to act, not only on debtors but also on other creditors.”

 Lee Buchheit, Cleary Gottlieb's lawyer who is defending Argentina and also handles the Greek case, acknowledged that "with the Argentine case we can say that the creditors found a theory that gives them power to act, not only on debtors but also on other creditors.”

Ambito Financiero

’Vulture’ effect: the Fund seeks changed in bonds

 

Monday, October 14, 2013

 

Washington - The developments in the Argentine lawsuit against the vulture funds in the United States is a topic of concern in the heart of the IMF and the international financial community. The number two of the entity, David Lipton, acknowledged that the organization is examining ways to modify bond contracts to stop the advance of the vulture funds upon countries with debt crises. "We are examining ways to strengthen collective action clauses to make them more robust in the face the potential holdouts, as well as possible amendments to the ‘pari passu’ clause that ensures consistency and predictability in all jurisdictions,” said Lipton. It was within the framework of a seminar with experts about the lessons from recent experiences of sovereign debt restructurings, and in tune with the Argentine position in its dispute with the vulture funds. The position was laid out only five days after the U.S. Supreme Court rejected, at least for now, taking up the appeal by Argentina to review the criterion of "pari passu" used by Judge Thomas Griesa and upheld by the Court of Appeals, which found that the country violated equal treatment of creditors.  In Washington, even though there is resistance to calling the holdouts "vulture funds", it is a new development that the IMF is encouraging a change in the current contractual approach, "one which provides more predictability" in the process of sovereign debt restructuring. The news comes from the side of the concern that exists over the outcome of the Argentine lawsuit, where the IMF and the specialized community of scholars and lawyers observed the unlimited power the vulture funds would get if they win the battle, and the consequent fear of a boycott of future sovereign debt restructuring. Lee Buchheit, Cleary Gottlieb's lawyer who is defending Argentina and also handles the Greek case, acknowledged that "with the Argentine case we can say that the creditors found a theory that gives them power to act, not only on debtors but also on other creditors.” “The current litigation (on the Argentine bonds) in U.S. courts casts a light on the limitations in the current contract model in cases of debt,” the Fund official said. The debt discussion meeting went further to how to being to enact these changes to curb the threat of the vulture funds. Jeromin Zettelmeyer, economist from the European Bank for Reconstruction and Development, said that a way to start would be to modify the internal mechanisms within the IMF itself, "so that countries that are heading towards an unsustainable debt situation are addressed well earlier.”