Debt: funds that are friends of the country will form committee tomorrow that will negotiate with holdouts
The group of bondholders led by Gramercy managed to add the most important debt holders. Even Fintech, of the reticent Martinez. The government is aware.
Thursday, November 14, 2013
By Esteban Rafele
The unusual “Gramercy solution” will take a new step tomorrow. The investment funds with restructured Argentine debt bonds will form the negotiating committee that will formalize the private offer to the holdout NML Capital of magnate Paul Singer, and other litigants. So assured a source linked to the negotiation to El Cronista, confirming that the government is aware of each and every move.
Gramercy, the investment fund with assets in Latin America of US$4 billion, managed this way to group together the majority of restructured debt holders. Even Fintech, the fund of Mexican David Martínez, partner of Clarin in Cablevision and the brand new purchaser of part of Telecom. Martinez opposed negotiating with Singer, but changed his mind.
The investment funds that are friends of the country proposed that every bondholder cede between 10% and 20% of their collections to a trust fund to pay a bonus to the vulture funds and the bondholders that didn’t enter the swaps. It would be, in total, some US$1 billion extra in five years. That “bonus” would complement the payments of the reopening of the swap that was already approved in Congress and that the government wants to formalize before the end of the year. The litigants would have to renounce their lawsuits and enter the restructuring.
According to Gramercy, with this solution “everyone wins”: the country would exit the default, the litigants would collect (assuming the government will not pay a contrary judgment that surpasses the value of the swap) and the country’s bondholder friends will recoup at least double what they give up due to the increase in value of their assets.
Yesterday, Gramercy emissaries told the government the news. The fund had proposed to gather all the creditors for the proposal to be able to go forward and, they said, they achieved it. “They are all there,” said a source aware of the negotiations. It was a fundamental requirement for moving forward with the offer to Singer and company. With an acceptance from 75% of the holders of each bond series, the government can modify the terms of the bond contracts, according to the prospectus of the renegotiated debt.
Gramercy presented the proposal to Economy Minister Hernán Lorenzino weeks ago. The fund asked that it be given until the end of the year to bring together the bondholders with normalized debt and then try to convince Singer, the most difficult to seduce.
The government tacitly endorsed the negotiations and receives periodic information. It gave the green light, but let it be known that it will not interfere. The official position didn’t change: the government’s only strategy to definitively solve the default is to reopen the exchange and debate at each available judicial recourse the ruling in favor of NML Capital, which will go back to the U.S. Supreme Court sooner or later, with a reserved prognosis.
Singer, however, continues sending negative signals. His spokesmen say that he is always ready to negotiate when the government sits down at the table. According to Bloomberg, he characterized the proposal as “making no sense.” Gramercy, however, believes it can convince him and communicated that it is talking with his representatives.