Billionaire Elliott Spurs Profits for All Argentine Bonds
The court case was brought by bondholders led by billionaire Paul Singer’s Elliott... Read More
Billionaire Paul Singer’s court victory against Argentina is turning into a windfall for all the nation’s bondholders.
Argentine notes soared to a three-year high after the government said it’s seeking a negotiated settlement to a decade-long conflict with holders of defaulted bonds, bolstering optimism the country will stave off a debt crisis. Its $1.3 billion of bonds due 2033 rose 9.64 cents on the dollar to 87.42 cents, the biggest gain in emerging markets.
After the U.S. Supreme Court declined on June 16 to hear Argentina’s appeal of a lower court ruling that ordered it to pay the holdout creditors at the same time it pays holders of its restructured debt, the government began to work toward an accord rather than following through on threats to halt debt payments again. The court case was brought by bondholders led by Singer’s Elliott Management Corp., which refused to provide Argentina debt relief following the nation’s $95 billion default in 2001 and have sued for full repayment.
“For the first time during this case there seems to be a more serious commitment to negotiations, and prices are reflecting that,” Stuart Culverhouse, the global head of research at Exotix Partners LLP in London, said in a telephone interview. “The U.S. Supreme Court decision ended up being positive. Otherwise, we would’ve been waiting for another year or so without any definition.”
June Payment
The so-called discount bonds retreated at 11:00 a.m. in New York, dropping 0.38 cent on the dollar.
Four days after President Cristina Fernandez de Kirchner called the court order “extortion” and backed a plan to skirt the ruling, fueling a bond plunge, she said June 20 that Argentina will seek a negotiated solution.
Argentina filed a request to U.S. District Judge Thomas Griesa yesterday to delay the effects of the ruling forcing it to pay $1.5 billion to holdout creditors when servicing its restructured debt on June 30, Economy Minister Axel Kicillof said at a press conference in Buenos Aires.
Holders of more than 90 percent of the defaulted bonds agreed to restructurings in 2005 and 2010, at losses of about 70 percent.
“What we’re asking for is a suspension of the ruling so that we can negotiate in fair, equal and legal conditions,” Kicillof said. “That’s to say, without failing to meet our obligations to holders of restructured debt.”
Stephen Spruiell, a spokesman for NML, declined to comment.
Cabinet Chief Jorge Capitanich said today in a press conference that the Argentine government wouldn’t make further comments on the case until Griesa decides whether to grant a stay on the ruling.
Additional Claims
A settlement with Elliott would help Argentina avoid what it says could be as much as $15 billion in additional claims that would cause a default.
The country’s bonds fell almost 20 percent in the two days after the high court decision, which prompted the government to unveil a plan to skirt the ruling by swapping securities governed by New York state law into local debt.
Prior to the court decision, Argentine bonds gained on speculation a final ruling would be delayed as the appeal was heard or the U.S. solicitor general’s opinion was sought.
Credit Suisse Group AG put the odds of a delay at as high as 60 percent in a June 11 report, while JPMorgan Chase & Co. said March 20 it was “highly probable” the litigation would be pushed into 2015.
“The evolution of her rhetoric over the past week strongly suggests that President Kirchner wants to avoid a selective default, let alone a solvency crisis, under her watch,” Casey Reckman, a New York-based economist at Credit Suisse, wrote in a report yesterday.
‘Better Off’
Jane Brauer, a strategist at Bank of America Corp., said a default still shouldn’t be ruled out.
“Without a stay, we think it likely that the bonds would go into payment default,” she wrote in a report yesterday.
The International Swaps & Derivatives Association said it was asked by Schulte Roth & Zabel LLP, a U.S. law firm, to rule on whether credit-default swaps on Argentina’s debt have been triggered after the government said it won’t make the payment.
Newspapers including Ambito Financiero and La Nacion have reported that Argentina is planning to propose paying holdouts in bonds next year to avoid depleting reserves and violating a clause in its restructured debt that forbids the country from making a better offer to creditors than it did in 2005 and 2010.
“Ironically, if Argentina can negotiate, it will be better off than if it could have kicked the case to next year,” Alejo Costa, a strategist at Buenos Aires-based brokerage Puente Hnos. Sociedad de Bolsa SA, said by e-mail. “It would open the country up to global markets without the shadow of the case looming.”
To contact the reporter on this story: Camila Russo in Buenos Aires at crusso15@bloomberg.net
To contact the editors responsible for this story: Michael Tsang at mtsang1@bloomberg.net;Brendan Walsh at bwalsh8@bloomberg.net Lester Pimentel, Bradley Keoun
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