Photo: Casa Rosada
Argentina’s lawyer is having serious problems convincing New York Judge Thomas Griesa that his clients will eventually pay hedge fund manager Paul Singer, and other bond holders, when their payments are due come December.And if you’ve heard a word of what Argentine politicians have said about the matter, there’s absolutely no wondering why. They are willing to pay some bondholders and not others — and they’re taking an ‘over-my-dead-body’ line on this one.
Here’s how everything got so complicated:
In 2001 Singer bought Argentine debt set to mature in 2017. After the country’s economy tanked he, like other investors, was given the opportunity exchange that debt for new bonds during the country’s restructurings in 2005 and 2010.
Singer did not do that. Instead he got the Ghanaian government to detain an Argentine naval ship as collateral and went to Court for his money. At the end of last month, Judge Griesa ordered Argentina to pay both investors that had restructured and those that hadn’t next month.
Since Argentina agreed to be subject to U.S. law when they took this money, Griesa reminded the country that they’d better comply. President Cristina Fernandez de Kirchner, though, said she has no intention of paying “vulture funds” that refused to restructure debt.
Last week, Argentina’s lawyer told Judge Griesa that Cristina’s talk was just an attempt to calm the bond market, Reuters reports, which has been slaughtering Argentine debt.
From the letter:
In a letter addressed to “investors” like himself, financier Paul Singer made a disdainful reference to the illegal seizure of the frigate Libertad that the attorneys for his Elliot Management fund achieved in Ghana. “We did not purchase Argentine debt in order to acquire a ship too large to sail in Long Island [Sound],” he said.
Apart from the mockery, the following is known: he and his “investor” friends bought these bonds during our moribund economy of 2001, in order to litigate and later collect at face value what they had bought for pennies.
The mask of the well-intentioned and disappointed “investor” Singer is pretending to wear instantly slips off again. The Elliot fund bought the bonds, he argues, because “they were cheap in relation to Argentina’s vast economic potential.” The reality, Mr. Singer, is undeniable: Argentina has settled 93% of the debt on which it defaulted in 2001. The bonds linked to GDP growth have paid off the great majority of creditors who trusted that this potential would result in economic growth, as it indeed did…
The letter ends:
Mr. Singer and friends: we Argentines have confronted you for some time, especially this year, and we will continue to do so. The entire world is watching ever more closely how this confrontation will evolve: a confrontation between a law-abiding country and government that honour their debts and pay them as they are due, and a group of speculators who insist on flapping their wings like vultures.
Yet things are changing. The vultures no longer soar over a moribund Argentine economy, and the rest of the world is becoming aware that, in order to recover from the crisis, it needs real investors and entrepreneurs. Not vultures.
That sounds a little like a ‘no, we’re not paying you,’ doesn’t it?
Judge Griesa has requested an affidavit directly from Argentina saying that they will pay the debt, but that has yet to materialise.
Oh, and in case you’re wondering, here’s Argentina’s December payment schedule, from Reuters:
On Dec. 2, Argentina is scheduled to make a $42 million interest payment to some bondholders who exchanged defaulted sovereign debt for new bonds in one of the country’s restructurings in 2005 and 2010. Exchange bondholders are due another $3 billion on Dec. 15 and between $100 and $200 million on Dec. 31.
See? We’ll find out soon enough if Argentina’s lawyers have more tricks up their sleeves.
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