Here is the proposed law rerouting payments under the restructured, now-defaulted Argentine bonds away from New York. Contrary to some reports, it is not a swap, just a unilateral attempt at firing Bank of New York Mellon and substituting Banco Nacion in Buenos Aires (or an alternative, if voted by the bondholders)

Escalating to Nowhere?

posted by Anna Gelpern

Here is the proposed law rerouting payments under the restructured, now-defaulted Argentine bonds away from New York. Contrary to some reports, it is not a swap, just a unilateral attempt at firing Bank of New York Mellon and substituting Banco Nacion in Buenos Aires (or an alternative, if voted by the bondholders). Bondholders could then show up in Buenos Aires or wherever Nacion sends their money to get paid. The proposal would also reopen the 2010 swap to the remaining holdouts. (HT Vladimir Werning, Katia Porzecanski)

Although the ultimate beneficial holders are not bound by the court orders, it is hard to see how most would get their hands on the FX without the help of entities that would either be clearly bound by or worried about New York court orders (banks, payment and clearing systems with a presence in New York). Some might show up in BA, but I am not holding my breath for a large turnout.

The move is obviously a violation of the court orders (so I guess that would be doublecontempt?), and not exactly in line with the indenture, which requires any replacement trustee to be a New York financial institution. But this is unremarkable--Argentina's actions so far have not exactly been about clever ways to comply (see full-page ads andICJ lawsuit).

To me, the tone of the legislative proposal is much more remarkable than the content. It takes 40 pages to tell Argentina's version of the events, including the ways in which the U.S. court system and others have failed it. As an aggrieved sovereign, it has no choice but ...

If ever there was a U.S. strategy, it is no more. Not now, not in January. I am not holding my breath for a RUFO sunrise. For now, I am watching Bank of New York Mellon (still sitting on $539 million in limbo from the June payment) and other agents and advisers in New York. One big mess just got messier.

August 20, 2014 at 12:54 PM in Sovereign Debt