Argentina Debt - The Framework of the Negotiations

Argentina Debt - The Framework of the Negotiations
Eugenio A Bruno
Partner
Garrido Law Firm

Argentina asked to have fair and balanced negotiations. On Monday the government asked Judge Griesa to grant a new "stay" in order to "protect" the negotiation process. Argentina wants to negotiate under circumstances that (1) allow it to continue paying the bonds restructured under the debt exchanges of 2005 and 2010 (in particular, the payment coming due on June 30, 2014); (2) avoid having the pressure to reach a settlement in a short period of time (less than 40 days); and (3) set forth a legal protective path until the termination of the effectiveness of the RUFO clause (December 31, 2014) in order to avoid potential claims from the exchange bondholders. Argentina considers the holdout debt is not only the claim under the NML case, but it also extends, financially, to a larger amount that would include the potential claims from other holdouts (USD 15b according to the government), and if it is not done properly, it would also extend to potential contingencies from the exchange bondholders under the RUFO.

Yesterday, NML responded Argentina`s petition by arguing that a "new stay" has no legal basis under the applicable laws and rules. NML mentions that if the negotiations advance the parties may still jointly ask the court a new stay in order to complete the negotiations and implement a settlement. NML highlights that the claim should be limited to this particular case.

Judge Griesa must next decide on whether or not the new stay should be given. Under normal circumstances a stay in this stage of the process (firm and definitive rulings) should not have legal basis to be granted. However, given also the particular circumstances of this complicated case it may not be ruled out the possibility that the judge accords to grant the stay, but the chances are more inclined towards the first interpretation.The concers of Argentina are reasonable but it may not be accomodated by the judge.

 

Argentina Debt - Paper: Main Terms and Conditions of the Argentine Bonds

Argentina Debt - Paper: Main Terms and Conditions of the Argentine Bonds
Eugenio A Bruno
Garrido Law Firm
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2279461

Argentina Debt - The Settlement Clause

Argentina Debt - The Settlement Clause
Eugenio A Bruno
Garrido Law Firm

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2456055

Argentina Debt - Need for an Integral Plan

A Integral Plan to Settle the Argentina Debt
Eugenio A Bruno

1) Need for a complete solution

Given the amount of the debt in default there is a need to have a complete solution of the Argentina debt in default. We believe that isolated arrangements are not enough given the fact that, after the resolution from the United Courts, all hold-out debt will be beneficiary of similar rulings to attach the flow of payments to the so called Exchange Bondholders. There is no money to make individual arrangements of several billion dollars permanently and the risk of having continued attachments is too high. Therefore, it is more beneficial to all parties (Argentina, the holdouts and the exchange bondholders) to reach a complete settlements of the whole 7% of the debt in default.

2) Amounts

At a glance, the principal amount in default is USD 6.6b. Approximately, 2/3 of said debt is subject to New York law and jurisdiction and the remaining 1/3 is subject to European laws and courts. As of December 2014, the debt in default will be approximately USD 25b. For example, under Judge Griesa`s rulings the principal amount of the claim is USD 428 and the payment judgment is USD 1.55b as of 2013 and more than USD 1.65b as of December 2014. 
In Europe the amount is USD 2.4b and with interest it is USD 9.6b. Therefore, the total claim in default is USD 25b.

An important percentage of the debt in default under New York is subject to judicial claims with firm and definitive rulings but without the application of the pari passu attachments. But it is expected that the plaintiffs under said rulings will petition the application of the pari passu embargos very soon and it is also expected that they will receive such benefit because they have the same bonds and rulings than the ones under the NML case.

In Europe, Italian bondholders are suing before the ICSID tribunal which granted jurisdiction to hear the case and it is expected to issue the laudum in the next months. According to the representatives of the Italian bondholders, if the laudum is in their favor, they will file them before the Griesa`s court for execution.


3) Guidelines of the Integral Plan

3.1. Proposal based on the payment capacity of Argentina
3.2. Addressed to all holdouts
3.3. Settle all the claims and lawsuits
3.4. Have the support from the Exchange Bondholders
3.5. Issue new bonds for new money to finance energy projects
3.6. Liability management to reprofile the debt payments coming due in the next 2-4 years.
3.7. Reduce the country risk to 200 basic points.

Argentina Debt The French Strategy

I think France saw a great opportunity to step up helping Argentina some weeks ago when it seemed that both the United States Executive Branch and the French-led IMF would file "Argentina´s best friend" briefs with the U.S. Supreme Court. Wanting to play a role in international finance matters, France would also be present in the "lawsuit of the century" in debt restructurings. Leadership issues involved. And also the "carrot" to Argentina because of the debt with the Paris Club. Besides, it would also show that France understands debt crises and therefore it would have more authority in the probably upcoming European debt restructurings. A three-fold great strategy for France. International leader along with the U.S. and the IMF, helping Argentina (to have Argentina in Paris) and become an authority in Europe.

Without the U.S. and the IMF, the French friend brief is left alone, for the moment. Therefore its firepower is reduced, but unless it is in the game, and may use it with Argentina at the Paris Club and in Europe for the debt restructurings of some of its members. Of course, it would be better if the U.S. Supreme Court pays attention to its brief. Without the U.S. and the IMF I would be pessimistic for now. However, we still have the next round of cert petitions regarding the upcoming ruling from the Second Circuit on the payment formula and the injunctions on the Bank of New York and other financial institutions. Which is another opportunity for France to step as is it for the U.S. Executive Branch and the IMF. The Supreme Court would then pay more attention.

Eugenio A Bruno
eab@garridolawfirm.com

Disputes between the United States and Argentina governments?

I dont think there is a dispute between these two governments, unless there is one, in which case the situation may be very difficult. Probably the IMF spokeman misexplained the real situation meaning that there was a discrepancy between the U.S. and other members regarding the IMF eventual brief. Not a dispute between the U.S. and Argentina. The existing dispute is between Argentina and certain private creditors, who are litigating against Argentina before the U.S. courts. Eventually there could be a dispute between Argentina and the U.S. Courts down the road. But not now.

I also understand that informally the U.S. government has indicated that nothing has changed and they would be ready to step up if the U.S. Supreme Court asks its opinion. They probably would also file an UNINVITED brief in the upcoming appeal regarding the injunction against the Bank of New York Mellon if the ruling from the Second Circuit is negative to Argentina.

Of course, an eventual amicus brief from the U.S. government helps a lot, but obviously the ultimate decision comes from the Supreme Court on (i) granting or denying the certiorari petitions, (ii) staying the decisions from the Second Circuit, (iii) asking Argentina a bond as a condition for the granting the cert petitions, and (iv) deciding the legal issues.

Eugenio A Bruno
eab@garridolawfirm.com

What to make of the latest

The United States decided not to participate now in favor of Argentina as an UNINVITED amicus. This negative affected the decision from the IMF not to file a brief as announced.

Questions for the near future:

1) Will the Supreme Court ask the U.S. to file an INVITED brief?

2) If so, what the U.S. government will?

3) After the upcoming ruling from the Court of Appeals, Argentina will appeal to the U.S. Supreme Court if the ruling is negative (not decided yet particularly on the attachments of the Bank of New York). In this case, the interest to the U.S. government may be more important as the payment system of New York may be affected. In this case, the U.S. government may decide to file an UNINVITED amicus brief, but this remain to be seen.

4) Of course, if no amicus brief from the U.S. government, the situation with the Supreme Court will be difficult. What will the Court do absence U.S. help?

5) If the Supreme Court accepts the appeal (either the existing one or the upcoming), will it be with Stay of Execution of the rulings from the Court of Appeals?

Eugenio A Bruno
eab@garridolawfirm.com
 

IMF, France, the United States, Argentina and the U.S. Supreme Court

In this frency of Amici, I think what could affect the United States courts, particularly the U.S. Supreme Court in accepting to take the Argentina´s cert petition is a filing from the United States executive power.

IMF without the U.S. filing? Value to be seen.

IMF with the U.S.? More important.

France without the U.S.? For your newspapers and French-Argentine relationship only.

It is key to have the U.S. filing, either uninvited these days, or after an eventual petition from the U.S. Supreme Court, to boost the chances for the U.S. Supreme Court to accept the cert petition. 

Eugenio A Bruno
eab@garridolawfirm.com

Argentina Debt - Upcoming Analysis: Credit Events and Different Zones of Legal Risks (from low to very high)

Argentina Debt - Decision from the Belgian Court

The decision from the Belgian court because it may open the door to attach the flow of payments intended to Argentine bonds in Euros, payable in Europe through the BNY Brussels and Euroclear.

Eugenio A Bruno
eab@garridolawfirm

Argentina Debt: European Injunctions v New York Injunctions

The International Game of Injunctions

Lawyers for holders of Argentine bonds issued in Euros sent a letter to the NY Court of Appeals letting said court know that they had filed a petition before Belgian courts to ask for a "European injunction" against the possible "NY injunction" that may be issued by judge Thomas Griesa with respect to the flow of payments of those bonds. The purpose of the petition is to protect Bank of New York Brussels and Euroclear, from where the money goes through.

The Belgian court rejected such petition on the ground that said petition was "premature" as there is enough time, according to the court, to analyze the "merits" of the case.

A new hearing was scheduled for September, where the Belgian court will discuss the "merits" of the petition.

Eugenio A Bruno
Garrido Law Firm
eab@garridolawfirm.com

Quick comment - Court of Appeals of the Second Circuit of New York will all the information necessary to issue the ruling

Last-minute appeal to the U.S. Supreme Court - What´s next?

The Argentine government yesterday filed a cert petition against the ruling issued by the U.S. Court of Appeal dated October 26, 2012.

Issues:

1) Whether or not the U.S. Supreme Court will accept the certiorari petition.

2) When the decision will be taken.

3) Whether or not the U.S. Supreme Court will request a bond to accept the petition.

4) Whether or not the U.S. Supreme Court will order Argentina to comply with the eventual ruling from the Court of Appeals during the time it takes to decide the cert petition.

5) The final outcome if it accepts the cert petition.

If you need any advice or opinion about the above-mentioned points, please contact us:

Eugenio A Bruno
eab@garridolawfirm.com
00 54 11 4 850 4000

Argentina Debt and Sobereign Debt Litigation: The Next 15 Days

Argentina Debt: What will the U.S. Court of Appeals of New York resolve in 15 days, and what the government responses will be: Favorable/Negative - BNY Attachment Yes/No - Payment outside NY: Possible/Impossible - Re-reouting? - In contempt with the NY Justice? - Payment in Argentina?

http://papers.ssrn.com/sol3/results.cfm?RequestTimeout=50000000

Eugenio A Bruno
Garrido Law Firm

Upcoming NY Courts ruling on the Argentina Debt Legal Case - What to do if the decision is negative

 Upcoming NY Courts ruling on the Argentina Debt Legal Case - What to do, if something, if the decision is negative.
Eugenio A Bruno
Garrido Law Firm

Explanation in this recent paper (free and safe download from Social Sciences Network Services website): 
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2279461

The need to avoid a "Back to the Future"

Sovereign Debt Litigation: Revisiting the Preview of the upcoming Argentina Debt Ruling in NY

Reviewing the preview of the upcoming ruling from the N.Y. Court of Appeals

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2252210
Eugenio A Bruno
Garrido Law Firm

New Paper on Argentina Debt and Sovereign Debt Litigation

Sovereign Debt Restructuring: Covenant and Default Clauses in Sovereign and Corporate Bonds and How the Difference Among Them Impacts in the NMLCase Against the Republic of Argentina in New York

Just published in Social Science Research Network:

http://ssrn.com/abstract=2279461

 

Eugenio A Bruno

Garrido Law Firm

 

Stats time: My take - Let me know about yours

Judicial Outcomes
Eugenio A Bruno
Garrido Law Firn
eab@garridolawfirm.com

"Pure Mathematics and Calculators"

• Argentina: it is like Series B in soccer.
• U.S.: draft for the NBA. And game 3 of the Heat-Spurs series.
• World soccer: who will qualify to the World Coup

 Judicial Outcomes


As the decision from the Court of Appeals approaches, it is a good time to discuss some general possibilites about its outcomes. Let´s go straight to the point. My take:

1) Decision on ratable payment: 9 to 1 in favor of the plaintiffs. It is very difficult that the judges ignore the contracts (indenture and terms and conditions of the bonds).

2) Decision on the injunctions on the Bank of New York: two months my take was 50-50%. Or tied in 50 to 50. In the last two weeks my perception may have changed. Why? Filings from Citibank Argentina and Eurobondholders discussing the effects of eventual ruling affecting the chain of payments (basically, "dont attach my payments"), the "policy paper" from the IMF (coupled with complete lack of being friend of Argentina through the filing of an Amicus Brief) ("we want the injunctions because that would prove that Anne Krueger and the IMF were right in promoting the SDRM and the market-solutions to solve defaults don´t work) and significant silence from the U.S. government ("is the U.S. a true friend of Argentina?" - of course you may ask the opposite question if you want, but I would not recommend it). So, now my take is 7 to 3 towards the plaintiff. Still, 30% is good, as Wall Street and the majority of the legal community in NY considers that it is dead cause, a sort of 9.5 to 0.5.

3) U.S. Supreme Court? Again, I am in minority again. I think the supreme tribunal will accept the case. My colleagues think I am wrong. I dont think so. My take is towards acceptance. My doubt is whether or not the Supreme Court will request a bond for the appeal, some kind of escrow payment by Argentina. High chances it will.

4) Decision from the U.S. Court: too soon.

And what about paying outside New York? Give me a call. 

Singer and Dart´s counterattack: "U.S. Courts - reject the petition to have this case litigated in Belgium"

Response from the Litigating Holdouts to the Belgian Case

Aurelius and all other parties to the NML case in NY filed a letter asking the NY Court of Appeals to reject the petition from the Eurobondholders to have a Belgian courts hearing the case and deciding about it.

The letter says:

"The highly publicized and widely known litigation before Judge Griesa and this Court
has been pending for more than two years. At the eleventh hour, the Euro Bondholders thrust
themselves into this litigation raising various highly attenuated and extraneous issues and
objections, all of which have been given a respectful audience by this Court and the district
court. Now, while this Court considers its decision, they have filed a last-minute collateral attack
on these proceedings in a foreign jurisdiction of their choosing. Needless to say, U.S. courts do
not defer to such later-filed proceedings. Laker Airways Ltd. v. Sabena, Belgian World Airlines,
731 F.2d 909, 927 (D.C. Cir. 1984) (“The mere filing of a suit in one forum does not cut off the
preexisting rights of an independent forum to regulate matters subject to its prescriptive
jurisdiction.”)."

"... Intervenors’ suggestion that this Court should in some fashion defer to the Belgian
litigation that they have decided to initiate is unfounded, is unwarranted, and borders on the
outrageous. Indeed, it is audacious in the extreme for these intervenors to bring an essentially
unrelated case in an unrelated jurisdiction for the obvious purpose, at the last minute, of derailing
or delaying the proceedings of this Court. This Court should, of course, handle the pending ng
expedited appeal as it otherwise would, without regard to the pendency of foreign litigation."

So the NY litigants want the ruling to include "ALL" payments made to the performing bonds, including the ones subject to Argentine law and now also the ones subject to English law, both payable outside the United States. In the case of Argentina, the payment systems uses the Central Bank and Citibank Argentina, and in the case of Europe, The Bank of New Europe. Still more litigation and uncertainty. The NY Court of Appeals should not affect these payments (Argentina and Euro bonds), but in the past the U.S. courts took jurisdiction over bonds issued exclusively under Argentine law, but with certain contacts with the U.S., such as road-shows, certain account payments, etc. This aspect would be the key in my opinion.

Eugenio A Bruno
eab@garridolawfirm.com

This material may only be used with express citation.

New York courts´ injunctions are not welcome in Europe... at all! Not another Normandie and D-Day

There is an European judicial audience now, with respect to Argentine defaulting and perfoming bonds
Eugenio A Bruno
Garrido Law Firm
eab@garridolawfirm.com




The Europeans, as the Americans, want an audience on the Argentina legal case, and they will have it. Particularly on June 25, the Brussels Commercial Court will hold a hearing. The legal proceedings have been initiated by certain holders of Argentine perforning bonds subject to English law (i.e. not Griesa´s laws as they would love to express I guess). The case is denominated Knighthead Capital Management,
LLC et al. v. Bank of New York S.A., et al.

The plaintiffs are from Belgium and hold euro-denominated bonds (“Euro Bonds”) issued in Argentina’s 2005 and 2010 exchange offers. The Euro Bonds are denominated in euros, governed by English law, and payments thereon are made wholly outside the U.S. through foreign entities.

According to the recent petition, the Belgian plaintiffs seek an order directing defendants Bank of New York Mellon S.A., Euroclear S.A., and Euroclear Bank S.A. (“Belgian Defendants”)—all Belgian entities—to
comply with their alleged duties under Belgian law and the Trust Indenture governing Argentina’s
exchange bonds. This means that the eventual injunctions from America, holding the whole BNY group around the world liable of complying with the NY court orders even with respect to foreign bonds, should, according to the Belgian plaintiffs fall somewhere in the Atlantic right before Europe (not another Normandie and D-Day)

On May 30, 2013, the Belgian Court accepted expedited briefing and
scheduled a determinative hearing for June 25, 2013.

The notification to the NY Court of Appeals from the Second Circuit was filed today and expresses that "as the Euro Bondholders have explained, the District Court’s injunction against foreign
parties impermissibly imposes obligations irreconcilable with foreign parties’ duties under local
law. The Belgian proceeding will conclusively determine the Belgian Defendants’ obligations
under Belgian law. We respectfully request that this Court find the injunction inapplicable to
foreign entities altogether, or, at minimum, withhold judgment respecting the injunction’s
applicability to Belgian Defendants pending determination by the Belgian court. By holding the
injunction applicable to Belgian entities acting on Belgian soil, this Court could contravene a
Belgian court’s definitive interpretation of Belgian Defendants’ obligations under Belgian law,
thereby violating the well-established principle that courts cannot require foreign nationals “to
refrain from doing an act in another state that is required by [that state’s] law.”

Therefore if the petition is accepted there will be a dispute among courts, Americans v Europeans, with the Bank of New York as hostage as the European courts will reject the injunctions and order the BNY to continue paying the eurobonds. Of course, the logical questions are what the NY courts will do and what the consequences for the status of the Argentine bonds will be. Additional analysis coming up soon.