eine Antwort auf Felix Salmon: Argentina, Elliott, and the pari passu war // felix ist m.E. viel zu pessimistich/negativ zu den Möglichkeiten von NML (Elliott) einzucashen eingestellt....
Apr 11, 2012
5:53 pm EDT
Having reported insightfully upon sovereign debt issues for many years, it
surprises that Mr. Salmon is not more fastidious about distinguishing fact from
fiction.
Can anyone name other sovereign indebtedness: i) with a strong pari passu
provision; ii) that is not subject to collective action clauses; and iii) in
which the issuer has in fact breached pari passu even by its own self-serving
definition ? No, the reality is that Argentina is unique, and the upcoming
appellate court decision will simply not have any significant bearing upon other
sovereign restructurings.
In his perfunctory disparagement of a US federal judge who has been handing
down landmark decisions since Mr. Salmon was still in short pants, Mr. Salmon
regrettably serves as apologist for a regime that has distinguished itself
through disregard for every norm of modern commerce and international relations
– just ask the IMF, the WTO, ICSID, the Paris Club, the anti-money laundering
Financial Action Task Force, thousands of Italian pensioners, institutional
investors such as TIAA-CREF, companies that invested in good faith, etc. Elliott
is hardly alone in challenging a G-20 country with ample liquidity and resources
that seeks to wrongly walk away from its lawful payment obligations and US
federal court judgments.
Throughout this piece Mr. Salmon adopts as his own the “masterful” arguments
of Cleary Gottlieb, the preeminent advocates for defaulting sovereigns. Perhaps
his views will change after he considers, as did Judge Griesa, the arguments of
opposing counsel. In the meantime:
1) Argentina’s new bonds might indeed have “performed extremely well” since
the discounted exchange, yet their value remains vastly below the face value of
Argentina’s original obligation. Mr. Salmon is premature in calling this a “rare
and public loss” for the “billionaire Republican activist Paul Singer” (surely
Mr. Salmon means no aspersion by that . . .), who obviously retains confidence
that Argentina can afford to pay its lawful obligations in full.
2) In 2003 Argentina argued that pari passu would be breached if it asserted
a legal basis for discrimination among creditors. Two years later it did exactly
that by enacting the “Lock Law”, as Olivares-Caminal, Gelpern and others have
noted. It is hardly nefarious that a creditor would decline to assert pari passu
in 2003 and yet do so now.
3) It is a profound distortion to characterize Judge Griesa’s orders as
compelling “innocent bondholders of Argentina’s new debt” to “be paying off
Elliott”. There is no such form of transfer within the orders, although
Argentina has threatened the court that it might default on the new debt if
Judge Griesa’s orders are upheld (despite having been found by the court to have
sufficient means to honor all of its obligations).
4) The Deconstructionist notion that pari passu has no meaning runs counter
to the logic and experience of those of us who have spent decades actually
signing loan agreements. Perhaps the attorneys polled by Gulati have forgotten
(or never knew), but involuntary subordination by a rogue sovereign is a clear
and visceral concern to anyone who exercises lending authority.
If a country elects to borrow in the capital markets of New York, and cloak
its loan agreements in the assurances of New York law and jurisdiction,
shouldn’t it pay judgments of the US federal courts ? Why does Mr. Salmon
recognize that “[c]ertainly Argentina has no intention of paying . . .
anything”, and yet not condemn such willful disdain for the essential bases on
which capital markets operate ?
Can anyone name other sovereign indebtedness: i) with a strong pari passu provision; ii) that is not subject to collective action clauses; and iii) in which the issuer has in fact breached pari passu even by its own self-serving definition ? No, the reality is that Argentina is unique, and the upcoming appellate court decision will simply not have any significant bearing upon other sovereign restructurings.
In his perfunctory disparagement of a US federal judge who has been handing down landmark decisions since Mr. Salmon was still in short pants, Mr. Salmon regrettably serves as apologist for a regime that has distinguished itself through disregard for every norm of modern commerce and international relations – just ask the IMF, the WTO, ICSID, the Paris Club, the anti-money laundering Financial Action Task Force, thousands of Italian pensioners, institutional investors such as TIAA-CREF, companies that invested in good faith, etc. Elliott is hardly alone in challenging a G-20 country with ample liquidity and resources that seeks to wrongly walk away from its lawful payment obligations and US federal court judgments.
Throughout this piece Mr. Salmon adopts as his own the “masterful” arguments of Cleary Gottlieb, the preeminent advocates for defaulting sovereigns. Perhaps his views will change after he considers, as did Judge Griesa, the arguments of opposing counsel. In the meantime:
1) Argentina’s new bonds might indeed have “performed extremely well” since the discounted exchange, yet their value remains vastly below the face value of Argentina’s original obligation. Mr. Salmon is premature in calling this a “rare and public loss” for the “billionaire Republican activist Paul Singer” (surely Mr. Salmon means no aspersion by that . . .), who obviously retains confidence that Argentina can afford to pay its lawful obligations in full.
2) In 2003 Argentina argued that pari passu would be breached if it asserted a legal basis for discrimination among creditors. Two years later it did exactly that by enacting the “Lock Law”, as Olivares-Caminal, Gelpern and others have noted. It is hardly nefarious that a creditor would decline to assert pari passu in 2003 and yet do so now.
3) It is a profound distortion to characterize Judge Griesa’s orders as compelling “innocent bondholders of Argentina’s new debt” to “be paying off Elliott”. There is no such form of transfer within the orders, although Argentina has threatened the court that it might default on the new debt if Judge Griesa’s orders are upheld (despite having been found by the court to have sufficient means to honor all of its obligations).
4) The Deconstructionist notion that pari passu has no meaning runs counter to the logic and experience of those of us who have spent decades actually signing loan agreements. Perhaps the attorneys polled by Gulati have forgotten (or never knew), but involuntary subordination by a rogue sovereign is a clear and visceral concern to anyone who exercises lending authority.
If a country elects to borrow in the capital markets of New York, and cloak its loan agreements in the assurances of New York law and jurisdiction, shouldn’t it pay judgments of the US federal courts ? Why does Mr. Salmon recognize that “[c]ertainly Argentina has no intention of paying . . . anything”, and yet not condemn such willful disdain for the essential bases on which capital markets operate ?