Sunday, March 27, 2016

‘Vultures’ ask gov’t to comply with pay date

Elliott Management head Paul Singer speaks at the World Economic Forum summit in Davos in a file photo.

Elliott, Aurelius file briefs at US appeals court, claiming injunctions shouldn’t be lifted

NEW YORK — Through new briefs filed at the United States judiciary, the largest “vulture” funds reasserted that they want to be paid on April 14 but expressed their doubts about whether the national government will be able to meet the deadline.

Elliott Management, Aurelius Capital, Blue Angel and Olifant reached a US$4.6 billion deal with Argentina, setting April 14 as the payment deadline — only one day after a key hearing at a US appeals court to decide on the injunctions against Argentina.

The government will seek to negotiate with the “vultures” an extension of the deadline but the negotiation will probably not be easy based on yesterday’s briefs — which show that there’s still a large distrust between both parties despite the debt agreement.

While demanding to be paid on the agreed date, the holdout funds also asked the US Second Circuit Appeals Court for the injunctions against Argentina not to be lifted. US District Judge Thomas Griesa granted the government’s request to lift the injunctions but the “vultures” appealed, claiming that such measure could jeopardize the debt talks.

“We want to get paid on April 14, as Argentina promised. No more litigations,” the Aurelius brief reads, asking the appeals court to review Griesa’s decision or at least to clarify that the injunctions will be lifted after they get paid — a request that had been rejected by the national government.

“Argentina’s resistance to such clarification shows why it was absolutely necessary for the plaintiffs to appeal the decision to lift the injunctions, instead of trusting that Argentina — a serial defaulter since 1827 — has changed its ways after Macri took office only four months ago,” Aurelius added.

Following the same train of though, Elliott Management said the likelihood of Argentina making the payment by April 14 is “remote” and questioned Griesa’s decision to lift the injunctions against Argentina.

“The possibility that Argentina will not pay by the deadline is not remotely hypothetical, given that one house of the Argentine Congress has passed a bill conditioning payments on this Court lifting all injunctions and that oral argument will take place on April 13,” Elliott wrote. “Whether or not this court ultimately affirms and if Argentina’s Congress requires the court to confirms lifting all injunctions as a precondition to payment, the likelihood of Argentina making payment by April 14 would appear to be remote,” it added.

The US Second Circuit Court of Appeals summoned on Friday Argentina and the “vulture” funds for a hearing on April 13 to decide on US Judge Thomas Griesa’s ruling that lifts the injunctions against the republic. The date was set despite Argentina’s request for a hearing on April 4, which would have given the government enough time to get the funds to pay.

Macri’s administration proposed a US$6.5-billion payment to settle the long-term legal battle stemming from Argentina’s record US$100-billion default in 2001. Of the approximately US$9 billion still outstanding in claims, the government has asked creditors to accept an average 25-percent haircut, vowing to pay them up front in cash, facilitated through the issuing of new bonds.

The offer has already been accepted by small and large creditors, including the toughest holdout funds Elliott Management and Aurelius Capital. That led to Griesa agreeing to lift an injunction against Argentina, which prevented it from servicing its restructured debt. The ruling frees Argentina to pay holders of its restructured bonds, who are now owed more than US$3 billion in past-due interest.

Negotiation

Finance Ministry officials said the government will negotiate with the “vulture” funds a new deadline, considering the delayed hearing date announced by the appeals court. The date can be changed only when there’s a mutual agreement between both parties.

“The April 14 deadline included in the settlement with NML and other creditors doesn’t ban both parties to change it when there’s a mutual agreement, specially now considering the hearing’s date,” Eugenio Bruno, debt expert and adviser to the Finance Ministry, said

As it seeks a new date, the government is moving forward with its plan to issue US$12.5 billion in debt to cancel the US$11.8 billion pending payment with the holdout funds. The timing and currency of the bond offering are not yet certain but the series were expected to come to market in early April.

Argentina has already named BBVA, Citigroup, Deutsche Bank, HSBC, JP Morgan, Santander and UBS as joint bookrunners for a possible bond sale, sources told Reuters this week. Citigroup’s head of emerging markets Guillermo Mondino wrote this month that an Argentina bond sale could pay yields of 7.25 percent on a five-year, 8.4 percent on a 10 and 9.7 percent on a 30.

Sources at the Finance Ministry told Télam state news agency that the goal is to reach an 8.5 percent interest rate, similar to the rate offered by state-controlled energy firm YPF on its last US$1 billion issuance two weeks ago. Three bonds would be offered maturing in five, ten and 30 years.

The government is now working on the schedule of a road show to attract investors for the debt issuance. Finance Minister Alfonso Prat-Gay and Finance Secretary Luis Caputo would travel to the leading world financial centres such as London and New York to see how much interest there’ll be for the Argentine bonds.

Herald with DyN