Saturday, 26 July 2014
Last updated 16 hours ago
Nov 19 2012 | 12:56pm ET
Argentina is continuing to seek a way to avoid both paying Elliott Associates and a technical default on its sovereign debt as it awaits a key legal ruling in New York.
The country and the hedge fund have spent years fighting over Argentina's 2001 default, with Elliott NML Capital affiliate refusing to participate in two debt exchanges involving significant losses for bondholders and demanding to be paid at par. Argentina has vowed not to pay what it calls "vulture investors," but has also sought to reassure a market that now appears to be betting that another default is inevitable.
One way that could happen, according to two Argentine newspapers, is that Argentina could seek to pay the exchanged bondholders outside of the U.S. In February a federal judge in New York ruled that the country could not pay those bondholders ahead of the holdouts, a ruling upheld by an appeals court. The ruling is currently stayed pending Argentina's appeal, and the judge in the case, Thomas Griesa, has promised to offer guidance "well in advance" of Argentina's next bond payment, Dec. 2, on how Argentina pays its bondholders.
Still, Argentina, which on Friday asked Griesa not to lift his stay until it exhausts its appeals, has vowed not to try to evade Griesa's ruling. But it has also made it a point of national pride not to give in to the holdouts, and Elliott in particular, which has led to, among other things, Elliott's winning a court ruling blockading the Argentine navy's flagship at a port in Ghana.
"Our creditors are those who participated in the restructuring offers in 2005 and 2010," Argentine economy minister Hernán Lopez said. "From the standpoint of our obligations and fairness, Argentina can have no other position that to stick to our commitments. We are going to continue to oppose any alternative which goes beyond this."
He said the country would "of course" refuse to pay the holdouts, but also said, "Argentina cannot and will not enter into default."
Hedge funds that did accept the exchange, or that own exchanged debt, are also involved. But one of their leaders, Gramercy Advisors, has denied holding talks with Argentina.
"Gramercy categorically and forcefully denies having had any discussions with the Republic of Argentina regarding alternative payment methods," it said. "We can confirm that we have hired David Boies as our legal counsel to represent us and other bondholders in this case."
In addition, Argentina and the Bank of New York Mellon are working to avoid potential legal complications for the latter. While both hold that as soon as Argentina transfers payments to BNY Mellon, the payment agent and trustee for bondholders, the money legally belongs to the bondholders. But the bank has asked Griesa what it should do if it is forced to choose between not paying the bondholders as per the judge's ruling, thus risking legal action against it, and violating Griesa's order.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…