change shouldn’t be expected in the short term, as “a deal is achievable, but it will take time, especially as the government will want to settle with all of the remaining holdouts and not just those who have filed lawsuits.”

Bonds under local legislation will be paid

Tuesday, December 30, 2014

Griesa ruling will freeze even more funds today

The amount of debt-servicing funds frozen by New York District Judge Thomas Griesa will rise today, as Argentina is expected to deposit US$980 million, a large part of which won’t reach their true owners.

Almost half of the funds — US$450 million — will go to service bonds under local legislation, which the Judge has refrained from interfering with, but the holders of the remaining US$530 million in Discount 2005 bonds will end the day with empty pockets.

These are the same bonds whose June 30 interest payment Griesa initially froze, leading the International Swaps and Derivatives Association (ISDA) to say the country was now in “selective default,” a definition that the country has contested.The NY judge has forbidden banking institutions to facilitate the country’s payments to the 93 percent of restructured bondholders until the remaining 7 percent of unrestructured holders are paid in full or an agreement is reached between all the parties.

Rufo expiry

The scenario is now open to change, however, as the Rights Upon Future Offers (RUFO) clause which Argentina has been quoting as one of the reasons stopping it from negotiating improved terms expires at the end of the year.

The RUFO clause prevents the government from offering better terms to those who refused to restructure any of the country’s defaulted bonds.Yesterday, Cabinet Chief Jorge Capitanich said the government would not change its negotiationg strategy with the so-called vulture funds. “We still want fair, equitable, reasonable, legal and sustainable conditions for 100 percent of bondholders,” Capitanich said.

Mark Weidemaier, a specialist interviewed by the Herald yesterday, said change shouldn’t be expected in the short term, as “a deal is achievable, but it will take time, especially as the government will want to settle with all of the remaining holdouts and not just those who have filed lawsuits.”

Herald with Reuters