Gesamtzahl der Seitenaufrufe

Donnerstag, 29. November 2012

Today the House Foreign Affairs Committee's Subcommittee on the Western Hemisphere passed H.R. 1798, the Judgment Evading Foreign States Accountability Act of 2011 (JEFSA).

Today the House Foreign Affairs Committee's Subcommittee on the Western Hemisphere passed H.R. 1798, the Judgment Evading Foreign States Accountability Act of 2011 (JEFSA).

ATFA Co-Chairs Nancy Soderberg and Robert Shapiro Applaud Subcommittee Approval of Legislation Holding Argentina Accountable
WASHINGTON, D.C. (November 29, 2012) - Today the House Foreign Affairs Committee's Subcommittee on the Western Hemisphere passed H.R. 1798, the Judgment Evading Foreign States Accountability Act of 2011 (JEFSA).  The legislation would "prevent foreign states that do business, issue securities, or borrow money in the United States, and then fail to satisfy United States court judgments totaling $100 million or more" from hurting U.S. businesses and investors and flouting the rule of law. 
The following statement should be attributed to Ambassador Nancy Soderberg and Hon. Robert J. Shapiro, co-chairs of American Task Force Argentina:

Today's markup of JEFSA shows that Congress understands the importance of holding foreign governments accountable when they act in bad faith regarding U.S. citizens and the international community. We commend the Subcommittee on the Western Hemisphere and particularly Chairman Connie Mack for his leadership and support in this matter, along with the other members of the subcommittee. JEFSA would have a profound impact when it comes to situations such the recent actions of the Argentine government, which has disregarded more than 100 U.S. court judgments directing it to honor its obligations to U.S. lenders and investors.   It is our hope that the Congressional leadership will give this bill due consideration to show the Argentine and any other irresponsible governments that there are consequences to their actions.   
About the American Task Force Argentina
The American Task Force Argentina (ATFA) is an alliance of organizations united for a just and fair reconciliation of the Argentine government's 2001 debt default and subsequent restructuring. Our members work with lawmakers, the media, and other interested parties to encourage the United States government to vigorously pursue a negotiated settlement with the Argentine government in the interests of American stakeholders.  To contact us, email or call 888-662-2382.

American Task Force Argentina PO Box 3197 Arlington VA 22203-0197

Mittwoch, 28. November 2012

Updated: The procedure of litigating pari passu? posted by Mark Weidemaier

Updated: The procedure of litigating pari passu?

posted by Mark Weidemaier
Lots of activity in the pari passu litigation: The lawyers for the exchange bondholders have been working overtime, filing an emergency motion to stay Judge Griesa's injunction (just granted here!) and asking the Second Circuit to let them intervene in the appeal. And there has been some great analysis of the injunction and its implications for exchange bondholders (by Joseph Cotterill at FT Alphaville), discussion of theconsequences for future restructurings (by Felix Salmon), and consideration of Argentina's suggestion that it might be willing to re-open the exchange offer for holdouts (by Vladimir Werning).
In this post, I want to explore the pari passu litigation from a different angle - one that focuses on a question of procedure raised by the Second Circuit's interpretation of the clause. Here's the question: Let's assume that the pari passu clause entitles creditor A to receive a ratable share of any payment made to creditors with whom creditor A ranks equally: creditors B, C, D, etc. Creditor A sues borrower to enforce this right. Who else should participate in the lawsuit? And can the lawsuit really be structured in a way that will be fair to everyone affected by it? (The exchange bondholders raised these questions in their brief, but the district judge didn't address them.)
I hope civil procedure buffs can weigh in on this, but shouldn't other creditors have a seat at the litigation table? In US federal courts, third parties must be joined as litigants if they have an interest in the subject matter of a lawsuit and if the lawsuit may "as a practical matter impair" their ability to protect the interest. As always, there are exceptions, but the starting premise is that such third parties must be joined. Recall that the Second Circuit interpreted the clause as a promise not to pay exchange bondholders without paying holdouts. Perhaps Argentina can afford to pay everyone, but its potential willingness to default rather than pay NML etc. arguably amounts to a "practical impairment" of exchange bondholders' interests. Plus, the logic of the Second Circuit's interpretation would require a country to make ratable payments even if it couldn't afford to pay everyone in full. So it's easy to imagine a situation where a suit to enforce the pari passu obligation would effectively take money from a creditor's pocket.
If it is necessary to join other creditors - in this case, holders of restructured debt - how might that work? A defendant class action, in which one or more exchange bondholders is appointed to represent all the others on the question of the meaning of the pari passuclause? Perhaps, but such a process would be kind of ironic, given the increasing reluctance of courts to certify plaintiff class actions under US law. Indeed, it might prove impossible to join all relevant parties. In such cases, the rules allow (but do not require) courts to proceed with the lawsuit, but this would result in a process that significantly impacts the rights of people who are not effectively represented. Many pari passuaficionados won't need another reason to question the court's interpretation. But if you are keeping score, this seems like another. Given the clause's inherent ambiguity, why choose an interpretation that is so difficult to enforce in a collectively fair manner?
UPDATED to include a link to the stay order.

It is hereby ORDERED that the November 21, 2012 orders of the district court entered in relation to this matter are all stayed pending further order of this Court.


It is hereby ORDERED that the November 21, 2012 orders of the district court entered in relation to this matter are all stayed pending further order of this Court.

At a Stated Term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on
the 28th day of November, two thousand and twelve.
Present: Rosemary S. Pooler,
Barrington D. Parker,
Reena Raggi,
Circuit Judges.
NML Capital, Ltd., Aurelius Capital Master, Ltd.,
ACP Master, Ltd., Blue Angel Capital I LLC, Aurelius
Opportunities Fund II, LLC, Pablo Alberto Varela,
Lila Ines Burgueno, Mirta Susana Dieguez, Maria
Evangelina Carballo, Leandro Daniel Pomilio, Susana
Aquerreta, Maria Elena Corral, Teresa Munoz De
Corral, Norma Elsa Lavorato, Carmen Irma Lavorato,
Cesar Ruben Vazquez, Norma Haydee Gines, Marta
Azucena Vazquez, Olifant Fund, Ltd.,
The Republic of Argentina,
Docket Nos. 12-105(L), 12-109(Con),
                     12-158(Con), 12-163(Con),
                     12-164(Con), 12-170(Con),
                     12-176(Con), 12-185(Con),
                     12-189(Con), 12-214(Con),
                     12-909(Con), 12-914(Con),
                     12-916(Con), 12-919(Con),
                     12-920(Con), 12-923(Con),
                     12-924(Con), 12-926(Con),
                     12-939(Con), 12-943(Con),
                     12-951(Con), 12-968(Con),
 It is hereby ORDERED that the November 21, 2012 orders of the district court entered in relation
to this matter are all stayed pending further order of this Court. 
 It is further ORDERED that the appeal from the November 21, 2012 orders of the district court
is expediated nostra sponte, with appellant’s papers filed by December 28, 2012; opposition papers filed
by January 25, 2013; and reply papers filed by February 1, 2013.  Parties granted amicus or intervenor
status shall file their briefs by January 4, 2013.  Oral argument for appellant and appellees shall be at 2 p.m.
on February 27, 2013.
For the Court:
Catherine O’Hagan Wolfe,
Clerk of Court

Montag, 26. November 2012

Argentinien-Anleihen droht neuer Zahlungsausfall FAZ Print 27.11.2012 von Carl Moses

Argentinien-Anleihen droht neuer Zahlungsausfall FAZ Print 27.11.2012 von Carl Moses

Argentinien-Anleihen droht neuer Zahlungsausfall

FAZ Print 27.11.2012

Auch die mit der Abwicklung betraute
Bank of New York sowie andere beteiligte
Intermediäre sind von dem Verbot

Die argentinische Regierung
kann und will zahlen - aber
nicht alles, was ein amerikanisches
Gericht vorschreibt.
mos. BUENOS AIRES, 26. November.
Knapp elf Jahre nach der Staatspleite
von 2001 steht Argentinien möglicherweise
abermals vor einem Zahlungsausfall.
Die Prämien für Kreditausfallversicherungen
(CDS) auf argentinische
Staatsanleihen schossen in den letzten
Tagen auf ein Rekordniveau, das weltweit
nur noch von Griechenland übertroffen
wird. Dabei kann und will Argentiniens
Regierung vermeintlich zahlen.
Mit einer sehr unpopulären Maßnahme
hat Argentiniens Staatspräsidentin Cristina
Kirchner sogar den Zugriff der Bürger
auf knappe Devisen beschränkt, um sicherzustellen,
dass die Zentralbank über
ausreichend Fremdwährung zur Bedienung
der Schulden verfügt.
Das Problem: Ein amerikanisches Gericht
verlangt von Argentinien die Begleichung
von Altschulden, deren Gläubiger
nach Ansicht der argentinischen Regierung
ihr Recht auf Bezahlung verwirkt
haben, weil sie frühere Umschuldungsangebote
nicht akzeptiert hatten. Zusätzlich
verbietet das Gericht Argentinien
und den im Zahlungsprozess involvierten
Banken, jedwede Schuldenzahlung
zu leisten, solange Argentinien nicht
gleichzeitig auch die umstrittenen Altschulden
bedient. Argentiniens Regierung
steckt in einer Zwickmühle. Folgt
sie dem Gerichtsurteil oder ihren Prinzipien?
Die Gläubiger müssen zittern.
Damit geht die Geschichte der bisher
größten Staatspleite in eine neue Etappe.
Argentinien hatte nach seinem Staatsbankrott
von 2001 in drei Umschuldungsrunden
2005 und 2010 insgesamt 93 Prozent
der Gläubiger von rund 100 Milliarden
Dollar dazu bewegen können, auf
mehr als zwei Drittel ihrer Ansprüche zu
verzichten. Alle bei diesen Umschuldungsrunden
ausgegebenen neuen
Staatspapiere hat Argentinien seither
pünktlich bedient.
Die Wirtschaft des Landes erholte sich
rasant. Viele der Gläubiger, die Argentiniens
harsche Umschuldungsbedingungen
seinerzeit nicht akzeptiert hatten, haben
das Land unterdessen vor Gerichten
in aller Welt auf die volle Zahlung ihrer
Ansprüche verklagt und in vielen Fällen
entsprechende Zahlungsurteile erstritAuch
ein Jahrzehnt nach der Verschuldungskrise sind die sozialen Nöte in Argentinien sichtbar.
ten. Bisher waren diese „Holdouts“ indes
kaum in der Lage, irgendwo auf der Welt
eine Vollstreckung ihrer Forderungen zu
erreichen. Mehr als zwei Dutzend Versuche
zur Pfändung von argentinischem
Staatseigentum wie dem Präsidentenflugzeug,
Botschafterresidenzen oder Zentralbankreserven
schlugen fehl.
Doch der Hedgefonds NML Capital
Ltd. aus dem Imperium des amerikanischen
Milliardärs Paul Singer, der notleidene
Argentinien-Anleihen zu Ramschpreisen
aufgekauft hatte, scheint nun einen
Weg gefunden zu haben, um Forderungen
von rund 1,33 Milliarden Dollar
gegen Argentinien durchzusetzen. Dass
es Singer gelang, in einer spektakulären
Aktion Anfang Oktober das Segelschulschiff
der argentinischen Marine in Ghana
festsetzen zu lassen, sorgte zwar für
weltweites Aufsehen, ist jedoch eher von
symbolischem Wert.
Wichtiger ist der Erfolg einer Klage
von NML in den Vereinigten Staaten.
Praktisch alle Schuldenzahlungen Argentiniens
an ausländische Gläubiger werden
über den Finanzplatz New York abgewickelt.
Vor einem Gericht in New York
klagte NML, Argentinien verstoße mit
seiner Schuldenpolitik, die umgeschuldete
Anleihen pünktlich bedient, Altschulden
jedoch ignoriert, gegen die in den
Anleihebedingungen zugesicherte
Gleichbehandlung der Gläubiger. Der
Distriktrichter Thomas Griesa gab NML
im Februar 2012 recht. Ein Berufungsgericht
bestätigte im Oktober die Ansprüche
von NML und einigen Nebenklägern.
Zu klären blieb lediglich die konkrete
Höhe und Modalität der von Argentinien
zu leistenden Zahlungen.
Argentiniens Staatschefin Kirchner erklärte
umgehend, ihr Land werde „nicht
einen einzigen Dollar an Geierfonds zahlen“.
In der Nacht zum Thanksgiving-
Fest am vergangenen Donnerstag reagierte
Richter Griesa mit einer für viele Beobachter
überraschend harten Verfügung.
Danach muss Argentinien NML den vollen
Nominalwert der Anleihen und alle
aufgelaufenen Zinsen ohne weiteren Verzug
zahlen. Vorbehaltlich einer neuen Revision
des Berufungsgerichts soll Argentinien
die 1,33 Milliarden Dollar auf einem
Treuhandkonto deponieren. Andernfalls
dürfe eine am 15. Dezember fällige
Zahlung von 3,5 Milliarden Dollar
auf Umschuldungspapiere nicht gezahlt
werden. Auch die mit der Abwicklung betraute
Bank of New York sowie andere beteiligte
Intermediäre sind von dem Verbot

Richter Griesa begründete sein harsches
Urteil mit den wiederholten Äußerungen
von Staatschefin Kirchner und anderen
Regierungsmitgliedern, wonach
Argentinien kein Urteil zur Zahlung an
Umschuldungsverweigerer befolgen werde.
Griesa hat Argentinien immer wieder
Aufschub gewährt und Pfändungsklagen
abgewiesen. Nun scheint der 82-Jährige
die Geduld zu verlieren.
„Nach zehn Jahren Rechtsstreit ist das
ein gerechtes Ergebnis“, begründete
Griesa sein Urteil. „Argentinien ist das
schuldig, und es schuldet das jetzt.“ Aufgrund
der erklärten Verweigerungshaltung
der Regierung müsse das Gericht sicherstellen,
dass Argentinien keine neuen
Wege finde, sich seinen Verpflichtungen
zu entziehen. Griesas Verfügung sei
„juristischer Kolonialismus“, empörte
sich Argentiniens Wirtschaftsminister
Hernán Lorenzino. „Es fehlt nur noch
dass sie die 5. Flotte in Gang setzen.“ Argentinien
will nun versuchen, vor dem
Berufungsgericht eine Revision des Zahlungsbefehls
zu erwirken. Eines hat das
Gericht hat in seinem Oktober-Urteil
freilich erkennen lassen. Es dürfte kaum
akzeptieren, dass Argentinien den
Holdouts gar nichts zahlt.

Griesa bügelt Ansinnen seine "Urteile" vs Argy zu Gunsten Elliott/NML auszusetzen/aufzuheben kurz angebunden ab !!!!

Griesa bügelt Ansinnen seine "Urteile" vs Argy zu Gunsten Elliott/NML auszusetzen/aufzuheben kurz angebunden ab !!!!

The motion listed as document number 402 for case 08-CV -6978 - Motion to Appear
as Interested Non-Parties - is denied.
Dated:   New York, New York
~. ;J,0  ,2012
Thomas P. Griesa
U.S. District Judge

The motion listed as document number 401  for case 08-CV-6978 - Motion to Vacate
- is denied.
Dated:  NewY~~NewYork
t,JrO  ,2012
~v~  Thomas P. Griesa
U.S. District Judge

Sonntag, 25. November 2012

Elliot vs Argentina is a domestic Argentine issue By Felix Salmon

Elliot vs Argentina is a domestic Argentine issue

By Felix Salmon
NOVEMBER 24, 2012
If you want to follow all the ins and outs of Elliott vs Argentina in the mainstream press, you’ll soon find something very interesting. It’s a US case, in a US court, which is very likely to have profound consequences for both US markets in general and for one of America’s most diplomatically important laws, the Foreign Sovereign Immunities Act. But to a first approximation, the US press simply hasn’t noticed.
Most US outlets have carried a single dry and dutiful report, buried on an inside page, somewhere; the NYT didn’t even manage that, relying instead on a wire report from the AP in Buenos Aires. The WSJ has not been much better, although its report is notable for getting notoriously reclusive fund manager David Martinez* on the record — a sign that if they put their mind to it, US journalists could really add some value here.
By contrast, the FT has been all over the story, in detail, from the very beginning, out of London and Buenos Aires. Alphaville’s Joseph Cotterill has created the invaluable Pari Passu Saga Series, the newspaper splashed the news all over its front page this morning, and the combination of Jude Webber in Buenos Aires and Robin Wigglesworth in London has proved to be incredibly powerful and astute. Even accounting for the Thanksgiving holiday in the US, the disparity is striking. The best US newspaper coverage — which has come, singlehandedly, from Michelle Celarier at the New York Post — doesn’t even come close to competing. (Michelle and I share more than an interest in sovereign debt: we’re both former correspondents for the UK’s Euromoney.)
But by far the most detailed and voluminous coverage has come from the Argentine press, which has been covering the New York court case in extreme detail. Every time that Judge Griesa releases an opinion, it’s immediately uploaded to a multitude of Argentine news sites, and thousands of Anglophone readers flock to download everything he has said, and argue about what it means. This story is huge in Argentina — and unlike the last time that Argentina defaulted, in 2001, everybody has the internet and is following what’s going on, in extreme detail, online.
Which makes the AP report that the NYT ran with particularly fascinating. Most of the time news stories are interesting when they tell you something you don’t know; in this case, we have a news story which is interesting because it tells us something which isn’t actually true at all.
As with so many other things involving Argentina, this case is rooted in the bloody dictatorship that ruled from 1976 to 1983. The military junta more than tripled the country’s foreign debts. By 2001, the burden had become unsustainable and the economy collapsed. Argentina’s $95 billion default still stands as a world record.
Sovereign debt is supposed to be paid no matter who runs a country, but President Fernández has always considered this defaulted debt to be illegitimate, forced onto the Argentines by dictators acting in concert with international financial speculators. She and her late husband and predecessor, Néstor Kirchner, who took office in 2003, have never made any payments on the defaulted bonds.
In fact, Argentina’s world record was broken by Greece, but never mind that. Much more interesting is the way in which the AP’s Buenos Aires reporter, Michael Warren, is reflecting a very common view of things in Argentina — that Elliott’s debt is odious and illegitimate.
Note that Argentina itself, in Griesa’s courtroom, has never made this argument. Quite the opposite: Argentina has always held, at least in New York court, that Elliott’s debt is entirely legitimate, and indeed is just as legitimate as the debt held by exchange bondholders. It’s up to Argentina, as a sovereign nation, which creditors it pays and which it doesn’t — but Argentina, at least as a matter of law, has never denied that it owes Elliott the full amount it’s being asked to pay.
What’s more, the debt that Elliott holds was not, in any real sense, “forced onto the Argentines by dictators”, and the case is not “rooted in the bloody dictatorship that ruled from 1976 to 1983″. Yes, the junta ran up a lot of debts — and Argentina restructured those debts in its big Brady deal of 1992. By the time the junta-era debts had been restructured, Argentina’s debt was an entirely manageable 30% of GDP; even two years later, in 1994, it was just 31.4% of GDP. It was only in the late 1990s that the democratically-elected Argentine government of Carlos Menem started running up the country’s debts to unsustainable levels.
Menem, of course, was a Peronist, just like Cristina Fernández and her late husband — and so it would be hard for her to blame Argentina’s current predicament on him. Somehow, she has managed to persuade the Argentine public — and even AP reporters — that paying off Elliott would be tantamount to ratifying the actions of the military junta which lost power before most Argentines were even born.
All of which helps explain why absolutely everybody is convinced that given the choice between paying all of its creditors and paying none of them — the choice which Griesa is giving Argentina — Cristina will choose the latter. Even Mitu Gulati tells Christopher Spink that “Argentina is likely to default on the exchange bonds” — and Gulati is the frequent co-author of Lee Buchheit, of Cleary Gottlieb, which represents Argentina.
Essentially, there are two choices here. Argentina can somehow win its appeals; or it will end up defaulting on its exchange bonds. The outcome Griesa is trying to order — where Argentina pays its exchange bondholders and its holdouts, in full — is simply politically impossible in Argentina.
Of course, another Argentine default wouldn’t be the end of the story. It’s hard to pay bond coupons in dollars, even if the bonds are issued under Argentine law, without going through some US-based intermediaries — and Griesa could always try and intercept those payments if Argentina thumbs its nose at him and simply ignores his order. What’s more, Elliott Associates will, everybody believes, make a large amount of money in the CDS market if Argentina does default, and the Argentine government would love to stop that from happening, somehow. (They can’t prevent the fact that Elliott has already made a large sum in the CDS market, on a mark-to-market basis.)
And there’s a decent case to be made that Argentina’s debt is undervalued right now even if it does end up defaulting. So long as exchange bondholders are happy getting paid out of Argentina rather than New York, they will probably end up with every penny they’re owed — in dollars. There might well be an uncomfortable interregnum, but ultimately they’re more likely than not to get their money. So if you have a strong stomach, maybe the exchange bonds are a buy right here — precisely because many institutional investors don’t have strong stomachs, and have no desire to be holding onto defaulted sovereign debt.
In any case, in order to really understand what’s going on with Argentina’s bonds, you need to be at least as well versed in Argentine politics as you are in the intricacies of New York law and pari passu clauses. Judge Griesa might have a surprising amount of power. But Cristina Fernández has more.
*Martinez, one of the world’s most successful distressed debt investors, is siding against Elliott Associates in this case. Similarly, David Boies is siding with the exchange bondholders against Elliott, despite the fact that his son, also called David Boies, founded Straus & Boies with Michael Straus, who represented Elliott in its last major sovereign battle, against Peru. Boies is representing Gramercy Advisors, who also made their name as a vulture fund. This is a case where everybody is pretending to be highly principled — but ultimately, as ever, it’s all about financial self-interest

Et Tu, FT? (Pari Passu Edition) posted by Anna Gelpern

Et Tu, FT? (Pari Passu Edition) posted by Anna Gelpern

Et Tu, FT? (Pari Passu Edition)

posted by Anna Gelpern
Laugh, cry, give up: the Financial Times editorial argues for Supreme Court review ofJudge Griesa's decision because not enough countries use collective action clauses (CACs) in their foreign-law debt ... and recommends that all do as the Eurozone and adopt CACs (... in their domestic-law debt?). 
Aside: True, Europe had long ago promised to lead by example and adopt CACs in its foreign-law debt, but that was largely beside the point because (a) Mexico had already led by example, and (b) most European sovereign debt is domestic-law ...But maybe not for long ... Then again, the pendulum may have swung back todomestic law. For now, London looks safe from Griesa-style lurches, but so did New York until a few weeks ago.
Bottom line: for sovereign debtors and creditors alike, domestic-law debt offers protections from holdout hostage dramas like the one playing out in New York. These protections do not come from CACs, but from the debtor's unilateral capacity to change the terms (for example, to reroute the payments).  The downside for the creditors is self-evident: there is no guarantee the debtor will use this capacity for their benefit.
The FT also notes improbably that the U.S. Congress could "modify contract law to deal more sensibly with the Argentine restructuring." The idea that the federal legislature would override state law for the sake of a politically toxic debtor is pretty far-fetched, even apart from fiscal cliffside timing.
Despite all that, it is hard to disagree with the basic thrust of the editorial and the existential follow-on: "While countries should service their debts in all but exceptional cases, an orderly mechanism for sovereign restructuring is essential for the exceptions. Just as with bankrupt individuals and corporations, value is only destroyed by holding insolvent debtors in never-ending limbo. ... A sovereign bankruptcy regime is not on the horizon."
And on the bright side, at least the FT cares.

Donnerstag, 22. November 2012

Elliott Management Vs Argentina Round 3: The Showdown

Elliott Management Vs Argentina Round 3: The Showdown

Elliott Management Vs Argentina Round 3: The Showdown

Tyler Durden's picture

Most recently, in "Elliott Management Vs Argentina Round 2: Now It's Personal" we laid out the story of how in the ongoing legal fight between Argentina's prominent distressed debt creditor, and exchange offer holdout, Elliott Management (and to a smaller degree Aurelius), and distressed debtor Argentina, the moving pieces continue in flux, even as various US legal institutions have demanded that Argentina proceed with paying the holdouts despite the Latin American country's vocal prior refusals to do so, and most importantly, the lack of a sovereign payment enforcement mechanism. Last night, the fight escalate one more, and perhaps final time, before the Rubicon is crossed and Argentina either pays Elliott, "or else" the country proves all those who furiously bought up Argentina CDS in the past two weeks correct, and the country redefaults on $24 billion of debt. Because as Reuters reports, late last night, US District Judge Griesa overseeing the Argentina case, ordered the Latin American country to make immediate payment with a deadline for escrow account funding of December 15.
In an ruling delivered just as the United States headed off for its Thursday Thanksgiving holiday, U.S. District Judge Thomas Griesa rejected Argentina's request to maintain his previous order halting payments to holdout investors who did not participate in two bond exchanges of defaulted sovereign debt.

The ruling is the latest development in a litigation saga that has lasted more than ten years and now appears to be favoring holdout bond investors such as Elliot Management Corp's NML Capital Ltd and Aurelius Capital Management.

If Griesa's ruling is upheld and Argentina chooses to defy him, U.S. courts could ultimately inhibit debt payments to creditors who accepted the terms of the restructuring, out of consideration for investors who rejected Argentina's terms at the time.

This would trigger a technical default on approximately $24 billion worth of debt issued in the 2005 and 2010 exchanges.
Griesa essentially circumvented the traditional appeals process and said no more delays.
Griesa wrote that he would ordinarily leave his order in place pending a ruling from the 2nd Circuit. However, he concluded this was not possible given comments from Argentine officials, including President Cristina Kirchner, that Argentina would not pay anything to the holdout bondholders.

"It is the view of the District Court that these threats of defiance cannot go unheeded, and that action is called for," Griesa wrote, saying the payments should be made as soon as possible.

The 2nd Circuit already upheld Griesa's Feb. 23, 2012 decision that Argentina violated equal-treatment provisions for all creditors when it chose to pay exchange bondholders and not holdout bondholders.

Given that Griesa's latest decision still needs the final blessing of the 2nd Circuit, he ordered that rather than Argentina paying the plaintiffs directly, it should deposit the money in an escrow account by Dec. 15.
In his ruling, Griesa said the less time Argentina was given "to devise means for evasion, the more assurance there is against such evasion."

"There is no question about what is 'currently due' to plaintiffs," Griesa wrote. "The amount that is currently due is the amount of the unpaid principal, the due date of which has been accelerated, and accrued interest."
The ball is now in Argentina's court. As a reminder, Argentina made it quite clear it would not pay "one dollar to the vulture funds." The vulture funds in question, are Elliott Management and Aurelius, who are owed upward of $1.3 billion. "Argentina owes this and owes it now," Griesa said. "It should be emphasized that these are debts currently owed, not debts spaced out over future periods of time." Griesa said NML and Aurelius should be paid concurrently or ahead of exchange bondholders.
And with the coupon payment due in one month, when Argentina has to pay $3.14 billion in accrued interest, we will know in a matter of weeks whether a district court's harsh language in New York is enough to make a Treasurer in Buenos Aires shiver in fear. Somehow we doubt it. Which also means Naval Commodore of His Own Majesty's Navy Paul Singer Second Rank will soon be upgraded to First Rank once he privateers a few Argentinian subs and perhaps an aircraft carrier... if any were still in service of course.
Without going into details (read Subordination 101 for the full primer), Griesa basically crushed any hopes the exchanging bondholders had that they had received priority status by being fooled into the exchange offer and accepting a price of 30 cents on the dollar:
Griesa rejected arguments from exchange bondholders that full payment to NML and Aurelius would infringe on their rights.

"In accepting the exchange offers of thirty cents on the dollar, the exchange bondholders bargained for certainty and the avoidance of the burden and risk of litigating," he wrote.

"Moreover, it is hardly an injustice to have legal rulings which, at long last, mean that Argentina must pay the debts which it owes. After ten years of litigation this is a just result," the judge said.
What is most interesting is that Griesa for the first time threatened not only Argentina but its "accomplices" i.e., funds transferring "third party" banks, with enforcement should they selectively wire funds to one group of bondholders, but not another - the hold outs.
The 2nd Circuit has also directed Griesa to spell out precisely how his injunctions would apply to third-party banks.

Among the banks is BNY Mellon, which transfers funds from Argentina to the country's bondholders. It argues that the injunction would interfere with its duties to the exchange bondholders and could cause a wider disruption to the largely automated international bank payment systems.

Griesa said BNY Mellon's arguments "miss the point" and if Argentina followed the appeals court ruling there would be "no problem" about the money ending up in the right accounts.

He said that if Argentina attempted to make payments to the exchange bondholders in violation of the court's rulings, third party institutions should be "held responsible" for ensuring they are not taking steps to violate the law.
Of course, BNY has the choice to just pull out and do no more business with Argentina and its creditors. There is always the option that creditors can come in on location in Buenos Aires and collect their interest in bags with dollars signs printed on them. Or just pull an Iran, and demand payment in gold via unsupervised gold transfer pathways, such as Turkey.... or China. If and when such a circumventing route is discovered, it will be one more chip away in the dollar's reserve status.
Finally, should Argentina not make the payment in December as loudly cautioned by Griesa, wait and see just why Elliott happens to be on the ISDA determinations committee. We anticipate that ISDA will find an Argentinia event of default will have occurred within seconds of the December coupon non-payment as the country follows Hostess into Chapter 22, only this time it is really personal between Argentina and some of the wealthiest hedge funds in the world.

Sonntag, 18. November 2012

Billions in bearer bonds could be lost due to Hurricane Sandy: sources

Billions in bearer bonds could be lost due to Hurricane Sandy: sources

  • Last Updated: 12:10 PM, November 18, 2012
  • Posted: 1:23 AM, November 18, 2012
It’s the biggest mystery on Wall Street.
Hurricane Sandy floodwaters inundated a 10,000-square-foot underground vault downtown, soaking 1.3 million bond and stock certificates — including bearer bonds that function like cash — and putting them in danger of turning to mush.
A contractor working for the vault owner, the Depository Trust and Clearing Corp., is feverishly working to restore the paper.
But the value of the threatened notes under 55 Water St. remains unknown to all but the innermost circle of Wall Street bankers.
One source said $70 billion in bearer bonds were in jeopardy.
LIQUID ASSETS: Thousands of bearer bonds — which could be worth as much as $70 billion — are now in danger of turning to pulp after Hurricane Sandy flooded the downtown vault that had been storing them.
LIQUID ASSETS: Thousands of bearer bonds — which could be worth as much as $70 billion — are now in danger of turning to pulp after Hurricane Sandy flooded the downtown vault that had been storing them.
DTCC — a depository controlled by the biggest financial firms on Wall Street — won’t say exactly what was in its vaults, how much the notes are worth, and who owns what.
Most of its member firms, including Deutsche Bank, JP Morgan Chase, Bank of America, UBS and Citi did not return calls.
The exception was Goldman Sachs, whose spokesman Michael DuVally confirmed Friday to The Post that his firm stored bearer bonds in the DTCC vaults. He acknowledged they would be nearly impossible to redeem if destroyed.
Yesterday morning, DuVally elaborated, and said the value of the Goldman bonds was “less than $1 million.” An hour later, he called back to say, “The market value of bearer bonds potentially impacted is less than $10,000.”
DTCC spokeswoman Judy Inosanto would say only that “a variety of equities and bonds” were damaged. “I can’t go into details. We do not provide values for security reasons.”
Even a contractor who bid on the cleanup and recovery job — the notes were drenched in diesel- and sewage-tinged water that filled 55 Water Street’s three sub-basements — clammed up when asked about the damage.
“It’s nobody’s business,” he said. “The public doesn’t need to know what’s in that vault. It’s between them and their customers.”
What is known is that for decades the vault housed millions of bearer bonds — worth many times that amount in dollars. In 1990, two-thirds of the 32 million notes in the vault were bearer bonds, DTCC records showed. Even as bearer bonds matured and the notes were removed, the vault continued to hold 5.4 million bearer bonds at late as 2003.
Experts say the only hope for saving the stacks of bonds would be to freeze-dry them in a cold vacuum chamber. As the air pressure in the chamber is reduced, and heat is increased, moisture in the documents would evaporate.
Security would have to oversee a tight chain of custody during the procedure, and the entire process could cost upward of $2 million.
Belfor, a Texas-based recovery firm rumored to have won the job, had a trailer parked outside 55 Water St. yesterday. When asked about a contract with Goldman to recover $70 billion in bearer bonds, Belfor spokeswoman Alex Gort said, “We have very strict confidentiality.”
Belfor workers at the site yesterday described a “complete restoration job” under “very high security,” but claimed to know nothing about the bonds.
“There are three vaults,” a hardhat said outside the building. “I wasn’t in the vault where the bonds are. Security is very tight down there. I know they were all under water. Billions of dollars’ worth, soaked. I know they are trying to pack them up.”
Bearer bonds are paper certificates, usually issued by governments, that are redeemable after a prescribed term. The bearer submits an attached coupon to receive payment. Because they are typically unregistered and can be used like cash, they were commonly used by those wishing to hide, and not pay taxes on, assets. They were banned in 1982.
But those that haven’t been fully redeemed remain in circulation.
Andrew Kintzinger, a securities lawyer, said that if a Wall Street firm were holding bonds as a custodian for investors, there would be electronic records documenting payments that would provide investors with proof of ownership.
But if Goldman or the other banks owned the damaged bonds themselves, redeeming them could be “a problem,” he said.
Additional reporting by Mark DeCambre and Kevin Fasick.

Samstag, 17. November 2012

As requested by the Court, on behalf of the Republ ic, I con finn that the Republic has complied, is complying, and will comply with the tenns of the March 5 Stay Order as SCI forth above in paragraph 3.

Hier erklären die Argys sich an die Direktiven von Judge Griesa halte.....(In Sachen pari passu, pro rata und Einschränkungen der Zahlungsweisen insbesondere in Bezug auf die BoNY Mellen


Pursuant to 28 U.S.C. § 1746, Francisco Guillermo Eggers declares as follows:

1.  I am the National Director of the  ationa!  Bureau of Public Credit of the
Ministry of Economy and Public  Finance of the Republic of Argentina (the "Republic").

2.  I am familia r with the facts of th is case and submit this declaration on
behalf of the Republic and in  support of the Memorandum of the Republic in  Response to
Plaintiffs' Briero" Remand.

3.  During the November 9, 2012 conference before the Court, the Court read
the following provision o f the Order dated March 5, 2012 (the "March 5 Stay Order'') into the

 "[1]0 secure Plaintiffs' rights during the pendency of the Republic's appeals of the
February 23, 2012 Orders to the Second Circuit, it  is ordered that the Republic shall  not during
the pendency of the appeal to the Second Circuit take any action to evade the directi ves of the
February 23, 2012 Orders in the event they are affinned, render them ineffective  in the event
they are amnned, or diminish the Court's ability to supervise compliance with the February 23,
2012 Orders in the event they are affinned, inc luding without limitation, a ltering or amending
the processes or specific transfer mechanisms by which it makes payments on the Exchange
Bonds, without prior approval of the Court" (March 5 Stay Orde r  2).

4.  As requested by the Court, on behalf of the Republ ic, I con finn that the 
Republic has complied, is complying, and will comply with the tenns of the March 5 Stay Order 
as SCI forth above in  paragraph 3. 

Case 1:08-cv-06978-TPG   Document 400    Filed 11/16/12   Page 3 of 4I dec lare under penalty of perjury under the laws of the United States that the
foregoing is true and correct.
Executed on November 16,2012, in Buenos Aires
Gui11enno Eggers