Thursday, 25 August 2016
Last updated 4 hours ago
Aug 19 2014 | 1:20pm ET
Both sides in Argentina’s debt dispute appear to be digging in their heels, as one major bank fears it will be caught in the crosshairs.
Elliott Management, one of the hedge-fund holdouts from Argentina’s 2001 default, plans to issue a number of subpoenas this week to companies tied to Argentine business Lazaro Baez, who is accused of embezzling millions from the country. The firm won the right to do so from a federal judge in Nevada last week.
In addition to 123 Nevada companies linked to Baez, a longtime friend of Argentine President Cristina Kirchner and her late husband and predecessor, Nestor Kirchner, Elliott plans to subpoena companies owned by Cristobal Lopez, another friend of the late president.
One of the Lopez-owned companies targeted by Elliott is Centenary International, a publicly-traded shell company that lost $1 million last year—but which recently inked a 10-year lease for 4,000 square feet of space in midtown Manhattan. Centenary also owns Argentine oil and gas assets.
Elliott’s strategy isn’t only to attempt to seize assets towards the $1.5 billion Argentina owes it, but also to discredit Kirchner’s government. Last week, the hedge fund’s lawyer said that “it’s our belief that at the end of that rainbow, we will find high-level Argentine officials participating in this scheme.”
“This investigation that we have undertaken we think has the added advantage of exposing corruption in Argentina,” Robert Cohen said. “And perhaps there will be additional investigations that will piggyback on what we find.”
The ramping up of that investigation comes after talks designed to end the stalemate—Argentina defaulted again on July 31 when it missed a US$539 million bond payment that it was barred from making by a federal judge—collapsed. Aurelius Capital Management, the other lead hedge fund in the case, said the negotiations proved that there was “no realistic prospect” for a private solution to the situation.
That did not sit well with Kirchner or her cabinet chief, Jorge Capitanich. The latter blasted Elliott and Aurelius last week, calling them “small, voracious interests that form a real international mafia.”
His boss echoed the sentiment this weekend, blaming the hedge funds for the talks’ failure—even though Argentina refused to sit down with them until just before its latest default.
“The main thing with vulture funds is that they don’t want a solution,” Kirchner wrote on her Facebook page. “Not just out of greed and avarice but also because of a political and geopolitical decision of wanting to indebt Argentina again, and to destroy, in any way possible, the restructuring of sovereign debt.”
Kirchner said that Aurelius’ comments were “threatening and hurtful to national sovereignty,” and “a threat against all Argentines.”
Also under threat is Citigroup, it told a federal appeals court. The bank said it is at risk of losing its Argentine banking license if a lower-court ruling barring it from paying bonds issued under Argentine law stands.
“It is increasingly apparent that the mandatory payment injunctions directed to the republic cannot be enforced,” Citi told the U.S. Second Circuit Court of Appeals yesterday. It wants that court to allow it to make a Sept. 30 coupon payment on the restructured debt.