nterview with lawyer specialized on financial law Sebastián Soler

Saturday, July 26, 2014

‘Argentina won’t default on Wednesday’

By Fermín Koop
Herald Staff

As an agreement hasn’t been reached so far between the federal government and holdouts, questions remain open over what could happen on Wednesday when the 30-day grace period for Argentina to pay ends.

In an interview with the Herald, Sebastián Soler, a lawyer specialized on financial law and a former adviser with the Central Bank presidency, says that if a deal isn’t reached the country wouldn’t default because it has already paid. At the same time, he explains the RUFO clause wouldn’t be triggered and question’s Griesa’s performance in the case.

Do you have positive expectations regarding the case?

I don’t know what’s going to happen but I hope an agreement can be reached on fair terms that contemplate all creditors. If we are going to solve this case, we also have to solve all the pending problems of the Argentine debt.

Can the RUFO clause be triggered if the government pays the holdouts?

As a lawyer, I think it’s technically accurate to say that a payment either in bonds or in cash wouldn’t trigger the RUFO since the government would be fulfilling a court’s order. Nevertheless, considering the unusual ruling of Griesa, we cannot dismiss that another judge would rule something unusual regarding RUFO. If triggered, creditors could ask for a better payment than the one they receive now.

What would be a reasonable solution for Argentina?

A reasonable solution would be avoiding the RUFO clause to be triggered, but to achieve that Griesa would have to issue a new stay. Without it, it’s hard to move forward. At the same time, the payment mechanism through which the government would pay holdouts should set a precedent for other bondholders benefited by Griesa’s ruling. The government also has to keep on paying bondholders that entered the 2005 and 2001 debt swap.

Judge Griesa has been criticized lately for his performance during the case. As a lawyer, how do you rate his work?

Griesa has been clumsy when managing the case. Rulings that solve conflicts as relevant as this one have to be precise and Griesa’s one wasn’t considering the numerous complaints of third parties that have questioned it and even said they don’t understand it. He was biased and we are now seeing the problems of that. He wants the parties to solve the problem, to avoid having to make a decision.

If an agreement isn’t reached next Wednesday, will the country default?

A default isn’t an abstract concept and it’s defined on the contract Argentina signed with its creditors. It means not paying either on the established time or in the 30-day grace period. But that definition has to be combined with what paying means, which is depositing the funds. Argentina paid so it would be technically incorrect to say the country will default on Wednesday. That doesn’t mean that if an agreement isn’t reached, holdouts wouldn’t demand for someone to compensate them. But that someone should be the Bank of New York and not Argentina.

@ferminkoop