Monday, February 29, 2016

Holdouts face deadline today on settlement

Judge Griesa has called a hearing for tomorrow with Argentina and ‘vulture’ funds

A key week begins today in Argentina’s long-running legal battle against holdout funds that could mark the beginning of the end of a decade-long legal battle that has kept the country out of international capital markets for more than a decade.

Today is the deadline for the holdout funds to give an answer regarding Argentina’s initial offer and tomorrow there will be a hearing for the holdouts to set out their positions in regards to the conditions imposed by New York Judge Thomas Griesa to lift the current injunction that forbids the country from servicing much of its foreign-law debt.

President Mauricio Macri is expressing confidence that a deal will be reached soon.

“I am confident the court proceedings with the creditors can be closed within a couple of weeks — confident and optimistic,” Macri said in an interview with Italian newspaper Corriere della Sera during a visit to Rome.

Settlement talks have been making progress, court-apointed mediator Daniel Pollack said last week, after creditors who have been suing Argentina in US courts said that broad terms of an agreement were in place.

Last week, a lawyer representing NML Capital, an affiliate of hedge fund Elliott Management, as well as other leading holdouts such as Aurelius Capital Management, said an agreement in principle on economic terms of roughly US$5 billion had been reached.

The statement by the lawyer, Matthew McGill, was made during a related hearing before a federal appeals court. Pollack later criticized the statement as a violation of an understanding of confidentiality between the parties.

HEARING IMMINENT

Griesa has called a hearing for tomorrow to hear arguments from Argentina’s creditors regarding the embargoes that are currently in place against the country.

Argentina’s lawyers had called on Griesa to call a hearing of all creditors as soon as possible and after that request was granted, NML requested that it be postponed, which was rejected by the US court.

The holdouts urged the Second US Circuit Court of Appeals last week to not dismiss various appeals by Argentina that, while pending, prevented Griesa from lifting the injunctions. Griesa had said he would lift the injunctions but said he lacked jurisdiction to do so while the appeals were pending.

While the appeals court said it would dismiss the appeals as Argentina requested, the judges said they would direct that any order by Griesa be put on hold for two weeks to allow bondholders to appeal.

Analysts have long said that the holdout funds are interested in dragging on the process as long as possible in order to twist Argentina’s arm in negotiations. While the biggest holdouts have battled Argentina in court for years, Macri’s administration has made no secret of its desire to close the legal battle in order to issue debt.

The proposed total US$6.5 billion settlement offer announced by Argentina on February 5 represents a 27.5 percent to 30 percent discount for creditors who filed claims of about US$9 billion.

The settlements are conditioned on the approval of the Argentine Congress and the lifting of injunctions in the litigation. Earlier this week, Finance Minister Alfonso Prat-Gay said Argentina is planning to issue bonds worth US$15 billion to pay the holdout funds.

“One-third of the funds have already accepted our offer,” Prat-Gay said.

The speaker of the Lower House of Congress, Emilio Monzó, said in an interview published yesterday that he expects negotiations with holdouts “to close this week.”

Monzó also expressed confidence that the government will be able to obtain enough votes to abolish the Padlock Law (Ley Cerrojo) and the Sovereign Payment Law as demanded by Griesa.

“We trust in the agreements with other caucuses, including the Renewal Front and the Justicialist bloc,” Monzó said.