Thursday, March 3, 2016

Griesa lifts injunction against Argentina

Court appointed mediator Daniel Pollack announces the agreement between Argentina and the main holdout bondholders at a news conference in New York City earlier this week.

Country could resume debt payments if Congress repeals laws, pays back holdouts

NEW YORK — United States District Judge Thomas Griesa sided with Argentina yesterday in its long-term debt standoff with the “vulture” funds, agreeing to let his orders protecting creditors expire as nearly US$10 billion in debts is paid off in a series of settlements reached over the last month.

Griesa’s order comes a day after the judge heard arguments from lawyers representing some creditors, who urged him to delay the decision for a month. They claimed more time was needed for Argentina to reach a deal with the holdouts who haven’t accepted the settlement offer yet.

In Manhattan, Griesa said that while he appreciated arguments by the creditors asking for 30 more days, “circumstances have changed so significantly as to render the injunctions inequitable and detrimental to the public interest.”

The ruling itself will automatically be put on hold for two weeks to allow for expected appeals. It is conditional, with the Argentine Congress having to repeal the Sovereign Payment Law and Padlock laws and paying creditors who on Monday agreed US$6.5 billion in settlements with the country.

The creditors include Elliott Management’s NML Capital and Aurelius Capital Management who were part of a US$4.65-billion accord announced on Monday. Despite those deals, they argued that settlements could fall apart if the remaining plaintiffs, holding 15 percent of the claims in the litigation, are not given a chance to settle too, as they likely would appeal a decision lifting the injunctions.

But Griesa said there was a “pressing need for certainty and finality” if the settlements are to succeed and that further delay could “seriously erode” Argentina’s ability to raise capital to fund the deals. He also said his decision placed no limit on the remaining plaintiffs from reaching agreements with Argentina, even if they chose to appeal.

“The injunctive relief cannot be allowed to be used as a tool for leverage in negotiations,” he wrote.

The injunctions at issue inside Griesa’s court prevented Argentina from servicing its restructured debt until it paid the holdout investors. Because of that, the ruling frees Argentina to pay holders of its restructured bonds, who are owed more than US$3 billion in past-due interest. Griesa said two weeks ago that he would be willing to lift the injunction but said such a move would be conditional on Argentina paying its debt to the holdouts that already accepted the country’s offer and Congress lifting the sovereign payment law and the padlock laws. Those laws prevent the country from offering holdouts better terms than those the nation offered to entities who agreed to restructure defaulted debt in 2005 and 2010.

In 2014, Argentina refused to heed to Griesa’s orders that it must pay the holdout hedge funds — led by NML and Aurelius — at the same time it paid bondholders who participated in the debt exchanges following the country’s earlier default. That order came after the US Supreme Court declined to hear Argentina’s appeal against Griesa’s ruling and settlement talks went nowhere.

The judge subsequently blocked Bank of New York Mellon Corp (BoNY) from processing a US$539-million payment that Argentina has designated for restructured creditors, resulting in legal limbo. The country then passed legislation that allowed it to remove the BoNY as its trustee and establish local payment mechanisms for its restructured creditors for Par bond payments, leading Griesa to rule that the country was in contempt of court.

‘Vultures’ offer

Following weeks of debt talks, President Mauricio Macri’s government proposed a US$6.5-billion payment this month to settle the legal battle stemming from its record US$100-billion default in 2001.

Of the approximately US$9 billion still outstanding in claims, the government has asked creditors for an average 25-percent hair-cut, vowing to pay them up front in cash, facilitated through the issuing of new bonds.

Up to three bonds will be issued sometime in April to pay the holdouts, Finance Minister Alfonso Prat-Gay confirmed Monday, adding that the government was already in talks with a group of banks. Noneless, the US$15 billion could be collected through more than one issuance, depending on the agreements reached with pending creditors by then and on the interest rates offered by the market.

The government has until April 14 to pay the holdouts but the date could be reviewed jointly with the “vulture” funds. The bonds will only be sold to investors interested in investing in Argentina and not to holdout funds, who would only be buying them to sell them immediately on the market and get better interest rates, the Finance Minister said.

Herald with Reuters