The government, behind a new offer to the vultures
Sunday, October 20, 2013
By Ezquiel Burgo
The Economy Ministry has conversed about an agreement that involves the vulture fund Elliott. It is a move to deactivate the debt lawsuit in the United States and, thereby, avoid an eventual setback in the U.S. Supreme Court. Last week, in Washington, Economy Minister Hernan Lorenzino met with investment funds and bankers in parallel to the IMF annual assembly. The objective? They brought him proposals for Elliott to drop its claim without the government publicly capitulating to the holdouts.
In recent days, sources linked to bondholder friends of the government and the vulture funds confirmed to Clarin that the signals between both parties were more intense than usual. In the last two years, the government has received various proposals for agreeing with the vultures but rejected all of them.
“The green light still hasn’t come from Olivos,” said someone who knows of the conversations. “But the government was frightened by the setback in the Appeals court on August 23, and Elliott is tired.”
Clarín communicated with the Economy Ministry on the matter. There they said there would be no comment.
At this moment, the market is watching two strategies to put an end to the lawsuit that is heading to the U.S. Supreme Court.
One of the plans is that Argentina’s bondholder friends cede a part of the value of their bonds in favor of Elliott.
If they all accept, the bonds (Discount) could go up. The vultures would gain less than the US$1.5 billion that Judge Thomas Griesa ruled in their favor, but even still they would get more than they first invested (Elliott bought bonds for US$100 million). The bondholder friends of the country would see the value of their bonds go up. And the government would resolve the issue without publicly capitulating before the holdouts.
The second formula to settle with the vultures would be to copy the ICSID model.
The Argentine government two weeks ago signed an agreement to pay off the judgments with give public services companies in the international courts of the ICSID. But only one of them will be paid. The other four sold their lawsuits to funds: in three of them, to Gramercy, an institution that is friendly to the government.
What would happen if an investor group bought Elliott’s lawsuit and negotiated with Argentina for an end to the claim in exchange for receiving a bond offer?
“There are those that believe that this operation could come together in the short term,” they said close to the negotiations.
In the government there is fear that the Supreme Court would reject taking the case. In whispers, at Economy they acknowledge that there were mistakes in the legal process. And that the political limits didn’t help either. The vultures, for their part, having arrived practically at the end of the judicial path understand that even in case Argentina suffers a setback in the Supreme Court, they might not collect: Argentina publicly refuses to pay them. The vultures sent conciliatory messages recently like a column from the portfolio manager of the Elliott fund in the Financial Times or statements from their attorneys on the financial news network CNBC in the U.S.
Howeer, a source close to Elliott says that “it is not ready to surrender. Also, I think that the Economy Ministry doesn’t have the green light for moving forward on this like it did with the ICSID issue.”
Argentina, according to a report on Friday from Telam, has hired attorney Paul Clement, ex-solicitor general of the U.S., to join the country’s defense team in the lawsuit.
Tomás Canosa collaborated on this story.