Sunday, July 20, 2014

Holdouts: all eyes turn toward Griesa’s court

US Judge Thomas Griesa’s courtroom in New York City will feature once again in the holdout saga next week.

Hearing scheduled for Tuesday in New York could provide needed breathing room

All eyes will once again be focused on New York this week amid chatter in the markets that the holdouts — locked in a battle of wills and wits with the government — are open to the idea of Judge Thomas Griesa’s court reinstating a stay.

Markets have been bullish and dollar-denominated bonds issued by Argentina ended the week strongly.

A meeting is expected on Tuesday in Griesa’s courtroom, during which a decision on whether to reinstate the stay may be taken. A stay would temporarily lift Griesa’s own ruling obliging Argentina to pay the NML and Aurelius funds the face value of defaulted bonds and would allow for breathing room for negotiations and for the payment of the country’s restructured bondholders. The meeting has been called following motions from the Bank of New York Mellon (BONY), the indentured trustee that currently holds a deposit of US$539 million in its account at the Central Bank of Argentina in Buenos Aires, on what it should do with the money.

In addition, the lead holdout, NML Capital Ltd, a subsidiary of Elliott Capital Management, has filed a motion, as have bondholders with euro-denominated Argentine debt, payment systems Euroclear Bank, Clearstream Banking and JPMorgan Chase & Co.

Negotiations between the Argentine government and the holdouts are currently stalled and there reportedly are no plans to meet. Nonetheless, Tuesday’s decision or lack thereof could prove decisive. The two sides have met separate with court-appointed mediator Daniel Pollack in New York but have yet to sit down and have a face-to-face discussion. although both profess that they want to negotiate.

Intricate web of discussions

President Cristina Fernández de Kirchner and her Cabinet have been busy this week hosting presidents Vladimir Putin of Russia and Xi Jinping of China in Buenos Aires while also participating at the BRICS-UNASUR summit in Brazil.

There, Fernández de Kirchner was adamant that the country would not default on its debts. “Argentina paid its debt on June 30 and will continue to do so. Default means not paying and can only be declared by a country that doesn’t pay” she told the BRICS summit. While in Brazil she also urged the holdouts to agree to terms of the standing swap offer which would give them a return of 300 percent on their initial investments.

“We aren’t saying that we won’t pay them nothing, we want to pay but on fair terms,” the president told the the holdouts by way of the BRICS summit.

Payment denied

On June 30 Argentina made a multi-million dollar payment to its restructured bondholders but the funds were rejected by Judge Thomas Griesa and have consequently been in limbo since.

The next week will also feature activity by the holdouts as the July 30 deadline for the restructured bondholders is approaching and the holdouts have publicly announced that they doubt Argentina is willing to avoid default.

“The Argentine government appears determined to default. We hope it chooses to avoid this dead-end path,” a spokesman for NML said on Friday.

In an another development, European bondholders have requested a US court to identify other restructured debt holders so that the country’s creditors can waive the Rights Upon Future Offers (RUFO) clause. The clause prohibits Argentina from improving the offers for the holdouts without also benefiting the restructured bondholders and is set to expire in December. Restructured bondholders are concerned that the current impasse will prevent them from receiving the regular debt payments that Argentina had been paying up until Judge Griesa’s decision.

The continuing negotiations come amid continued political support for Buenos Aires. President Xi Jinping of China said at Government House on Friday that China supports that Argentina’s negotiations with restructured debt holders be respected. The comments were taken as a reference to the country’s battle with holdout creditors.

Herald staff