Kicillof’s meeting with UBS and Deutsche Bank, who presented new proposal to the government for definitively solving the problem of the debt in default and also the possibility of getting dollars on the international capital markets, marks a change.

Infobae

Axel Kicillof takes charge of the renegotiation of the debt with bondholders that didn’t enter the swap

The Economy Minister drew up a team of economists in his confidence, belonging to La Campora.  Argentina will file its last appeal for the U.S. Supreme Court to take up the lawsuit against the holdouts  

 

Monday, February 17, 2014

 

By Carlos Arbía, From the Economy Ministry

 

The appeal that the Argentine government will make this week before the U.S. Supreme Court on the sentence against it in the Court of Appeals in New York will begin with an unexpected twist: the negotiations on the lawsuit, which orders Argentina to pay some US$1.5 billion in cash to the vulture funds over the debt in default will go forward with other protagonists.

 

According to what InfoBAE could find out, Economy Minister Axel Kicillof is in direct charge of the restructuring of Argentina’s debt in default for some US$20 billion, leaving to the side the work that was being done by the recently created Debt Restructuring Unit in the charge of ex-minister Hernan Lorenzino, seconded by ex-Finance secretary Adrián Cosentino.

 

Both remain in that entity, but Kicillof in parallel has set up another team with economists in his confidence.  Finance Secretary Pablo López and assistant secretary in that area, Juan Cuatromo, economists belonging to the group “La Campora”, make up, with the support of the ambassador in Washington, Cecilia Nahon, the new team that has as its objective to resolve the problem of the debt in default and financing between May and October of this year in case the U.S. government decides to support Argentina through an amicus curiae brief.  

 

Kicillof’s meeting with UBS and Deutsche Bank, who presented new proposal to the government for definitively solving the problem of the debt in default and also the possibility of getting dollars on the international capital markets, marks a change.

 

Lorenzino and Cosentino were the ones that met with the banks.  The Restructuring Unit was created because Kicillof didn’t want to be in charge of the debt restructuring and the problem of getting financing on the capital markets.  That entity was created last November through Decree 1935/2013 and Lorenzino was named Chief of the Unit carrying out his functions of secretary "ad honorem", assisted by Adrián Cosentino, as  Coordinator, with assistant secretary rank.

 

But Kicillof changed his mind and Finance Secretary Pablo López would be the one in front in the same informal way.  In the middle there was the fall of the so-called “Gramercy Solution”.  Kicillof and his team were not in agreement with that option.  It was a kind of negotiation between private parties, to indirectly pay the vulture funds with State money but through a third, which would be Gramercy.  The proposal was also ruled out by the vulture funds.  

 

On the financial market it is said that option was suspicious.  In particular because Lorenzino and Cosentino were clinging to that proposal and didn’t explore any others.  This had not convinced Kicillof, who directly let the Gramercy offer fall away as it would not guarantee Argentina the fresh dollars that some of the foreign banks were offering at single-digit rates.  “Argentina could finance itself abroad with a rate similar to the placements of bonds by YPF last year at 8.75% and in the worst case scenario it would be very close to 9.99%,” said one of the negotiating banks.

 

Concretely, Kicillof and his team are seeking a proposal that not only definitively solves the problem of the debt in default or not normalizing with the holdouts so much as also bringing in new money to the government for a figure that could reach US$10 billion for infrastructure investments, energy and increasing the Central Banks international reserves.

 

By what InfoBAE could learn, only the UBC and Deustche Bank proposals will guarantee the Argentine government that double objective and those from Goldman Sachs and HSBC were far off the mark.

 

Among these options the one from the Garrido Firm is highlighted, which is associated with one of the banks that met with Kicillof.  Among its main points is a restructuring of the debt in default with a haircut through a swap for new bonds coming due in a long term and with a payment at expiration of the bonds, and the possibility after the close of the swap the Argentine government would access fresh money for some US$10 billion for investments in infrastructure, energy and to increase the reserves of the BCRA.  There isn’t a payment of commissions from the government now that the holdouts are the ones in charge of paying the banks, it wouldn’t require a cash payment from Argentina and the proposal guarantees the end of the lawsuits and attachments from bondholders and vulture funds.

 

This week, Argentina will have, with a new appeal, a new chance for the U.S. Supreme Court to take the case.  But according to what the attorneys from the firm of Cleary Gottlieb Steen and Hamilton report, after incorporating expert Paul Clement, the deadline for a definitive solution is between May and October of this year.  One must recall that the ruling in July of last year from the Court of Appeals approved the form of payment proposed by Judge Thomas Griesa on October 23, 2012 of US$1.5 billion to the holdouts and the vulture funds that didn’t enter Swap I and Swap II, but Argentina has the opportunity that the timing for a definitive ruling for or against would extend to October of this year.  The first ruling has already been rejected for treatment by the Supreme Court but there isn’t a definitive ruling for now.

 

The government will try to show that there was a lack of equality in the payment to the holdouts and vulture funds if it is compared to the rest of the bondholders that entered the first and second debt swaps.  The big doubt is if the government will also postpone that the decision to reopen the debt swap that was approved by law of Congress but that has not yet been issued rulemaking from the Economy Ministry, in particular because it is a proposal that according to the opinion of the main banks that have visited Kicillof it has no chance of being accepted by the vulture funds since it doesn’t improve on the proposal made to the bondholders in previous swaps.