The ruling extends the clearance given to NML and Aurelius to the so-called “me too” bondholders who presented themselves in Griesa’s court to demand equal treatment. Griesa has not yet revealed any details on the amount of bonds held by “me too” investors.

Tuesday, November 4, 2014

Griesa widens battleground

Economy Minister Axel Kicillof heads a press conference in Buenos Aires earlier this year.

Other unrestructured bondholders could join NML, Aurelius in meetings with Special Master

New York District Judge Thomas Griesa authorized mediator Daniel Pollack yesterday to call other holders of the seven percent of unrestructured bonds to join NML Capital and Aurelius vulture funds at the negotiating-table with Argentina to reach an agreement over his decision to block the country’s repayment of the remaining 93 percent of bonds until theirs are also paid in full.

The ruling extends the clearance given to NML and Aurelius to the so-called “me too” bondholders who presented themselves in Griesa’s court to demand equal treatment. Griesa has not yet revealed any details on the amount of bonds held by “me too” investors.

Earlier, Economy Minister Axel Kicillof hinted in an interview with Mexican daily La Jornada at a possible deal with these seven percent of bondholders once current restructuring rules expire in January.

Kicillof suggested a possible deal with them when the Rights Upon Future Offers (RUFO) clause —which the government fears could unravel the 2005 and 2010 restructurings, by forcing the country to pay the remaining 93 percent of bondholders as much as the vulture funds get — loses validity, a topic about which the government had so far remained mostly tight lipped.

“At the end of this year, when the instruments that the vulture funds have used for extortion disappear, there will be a better possibility of dialogue with creditors who opted to stay out of the restructurings,” Kicillof argued.

The extortionate language from Singer, however, continued yesterday, when in a letter to his hedge fund’s investors he claimed that until the government makes the “appropriate move,” his company will “continue to enthusiastically pursue vigorous enforcement of our contractual rights, including by following the trail of Argentine assets wherever it leads.”

With yesterday’s ruling from Griesa, the situation is now such that more pari-passu plaintiffs will be added to the list demanding payment from Argentina, which according to lawyers from the remaining 93 percent of bondholders could force Argentina to fork out bigger payments.

However, this will also mean that now all bondholders could be sitting at a possible negotiating-table in January, with none of them awaiting a ruling from Griesa, which might shorten negotiating times to reach a full settlement that solves the issue.

According to Singer, Argentina can choose between having more assets at risk of seizure by international courts or accepting his group and New York District Judge Thomas Griesa’s demands, which would give the country “compelling and clear” benefits which are “ripe for the picking,” financial news site ValueWalk reported.

In his interview with La Jornada, Kicillof described Singer’s tactics as designed “more by lawyers than by financers,” and only successful because they found a judge who echoed their arguments.

The Economy minister also took the opportunity to thank the Mexican government for its support with regards to the conflict, highlighting it as one of the countries that “showed a positive willingness to tackle a problem that they wouldn’t want to see for themselves in their horizon.”

Now, Singer is looking for other judges around the world to gain more leverage over Argentina, as it did when a Ghana judge confiscated the Fragata Libertad ship or when a Nevada judge authorized his group to chase assets allegedly linked to Argentine corruption.

This, plus the risk of restructured bondholders triggering the also-feared “acceleration clause” —which could force the country to pay in advance the whole of its debt, if a quarter of the holders of one series of bonds whose payment has been blocked demands it — and the plans of looking for access to international credit, is giving Argentina reasons to consider a deal with Signer and the rest of the holdout creditors.

Led by NML Capital Ltd and Aurelius Capital Management, these bondholders are suing for 100 percent of face value plus interest even though they had purchased most of their bonds for pennies on the dollar after the 2002 default.

Analysts from investment bank Credit Suisse recently met with government and opposition figures, and concluded that “we found generalized optimism that the government is likely to negotiate with holdout creditors in early 2015,” in a note released to its clients.

Soros wants no Griesa block

Two investment funds, one of them managed by the world-famous billionaire finance trader George Soros, yesterday asked a London judge to respond to their demands to receive Argentina’s repayments on its euro-denominated restructured bonds, claiming to be “innocent third parties” in the dispute between Argentina and the non-restructured creditors in New York.

The total amount of bonds under European jurisdiction (“eurobonds”) owned by Soros’ firm, Quantum Partners LP, and Kyle Bass’s Hayman Capital Management LP adds up to US$ 1.6 billion, according to Bloomberg.

The groups’ lawyers claimed that both funds are “entitled to be paid their share” of the proceeds from the eurobonds. “The US Court’s orders should not apply to bonds under jurisdictions outside the United States,” they explained.

The Cristina Fernández de Kirchner administration has been aligned with George Soros on a number of issues. In September, both of them were pictured together after an hour-long meeting in New York, after which Soros’ spokesmen praised the improving perspectives of the Argentine economy and its drug policy reforms.

In August 2014, it was disclosed that Soros had more than doubled his stake in YPF to 3.5 percent, amid reports of interest in the promising Vaca Muerta shale fields. This, coupled with his investment in the restructured bonds that Argentina has been blocked from paying, has put Soros’ interests in line with the government’s position on some crucial issues.

Bass’ Hayman Capital has also been supportive of Argentina’s position. On August 27, he told the Herald that Argentina had not defaulted, because it paid what it was due but was blocked in a “once in a lifetime case” by a wrongful interpretation of the pari passu clause by Judge Griesa. He also asked for a sovereign restructuring mechanism to be created and claimed Singer is “holding poor countries as hostages.”

Argentina’s Central Bank Governor Alejandro Vanoli also defended yesterday the country’s decision not to strike a deal in August with the vulture funds, denying that a crisis was triggered by it.

Herald staff with Reuters