Sunday, February 7, 2016
‘We are now throwing the towel against the ‘vultures’’
By Fermín Koop
After it issued its formal offer, the national government is expecting the largest holdout funds to agree to end their litigation against the country and for United States District Judge Thomas Griesa to lift the injunction against the country even if some “vulture” funds refuse to accept the offer.
Following that path, however, isn’t without risks, warned Sebastián Soler, a lawyer specializing in financial law and a former adviser to the Central Bank presidency during Mercedes Marcó del Pont’s tenure.
In an interview with the Herald, Soler said the government should only move forward with the deal if all the holdouts accept as it could give way to legal claims in the future. At the same time, he said the debt haircut offered to the “vultures” is too low, noting they would receive a “massive” profit as a result.
How do you see the government’s offer to the holdouts?
Macri is doing what he promised, making a deal with the “vultures” no matter what. It’s a highly generous offer as they couldn’t have offered a lower debt haircut.
But wouldn’t the haircut be higher if all the holdouts accept the offer?
If there’s one thing that everybody should agree on is that an agreement can’t be done without all the “vultures” saying yes. Partial deals won’t work as we could continue to be blocked by Griesa and more claims could follow. But even if all the “vultures” accept the offer that doesn’t mean we won’t have to deal with bad news later.
Why do you think an offer came so quickly?
Because their plans A and B failed. They were expecting a large number of foreign investments to come to the country due to the supposed new trust on Argentina. But the Central Bank foreign-currency reserves are at the same level as when he took office — not considering the expensive loan signed with international banks — and the Merval benchmark stock index has actually dropped. Their plan B was to carry out debt issuance but they twice tried and failed. They know they need dollars for the second half of the year after the grain harvest season.
Two funds have already said yes to the offer but the largest ones, such as NML and Aurelius remain elusive. How do you think they will react?
Those two funds were already engaged in talks with the previous administration. The ones that haven’t accepted the offer yet have always been the main problem. Without them there’s no deal. It’s not promising that the offer has already been disclosed without a deal.
Former Economy Minister Axel Kicillof warned last week that the restructured creditors could ask a US judge to get paid the same as the “vultures.” Is that an actual risk?
After what happened with Griesa, there really is no way to predict how New York judges will behave. The immediate risk is if the government moves forward with the offer without the acceptance of all the holdouts, as the ones who don’t agree could go to the courts later. Restructured creditors represent a low risk after the RUFO expired. But low risk is actually high risk in New York due to its unpredictability. Argentina was a pioneer in the battle against the “vultures” and we are now dropping the towel.
How do you think the Congress is going to react to the offer?
If I were a Victory Front lawmaker, I would vote against the agreement as it opens the door to indebtedness.
And what about Griesa?
I think it’s hard for Griesa to lift the injunction against Argentina without all creditors saying they agree with Argentina’s offer. If an insignificant number of creditors rejects the deal, he could decide to lift it, claiming the justice balance favours lifting the injunction. But with only two creditors on board and the four largest ones out, I find it unlikely.
Since you question the deal, what other solution would you have carried out?
The government should have followed the same path as CFK and kept resisting. That doesn’t mean a deal couldn’t have been signed later. But they should have waited as they can get foreign funding from alternative sources. The “vultures” are now getting a massive profit.