Argentina Agreement with Bondholders

Pubblicato il 27 Gennaio 2022 in Senza categoria


Large-scale debt restructuring was urgently needed as high-yield bonds had become unaffordable. However, the Argentine government faced major challenges as it tried to refinance its debt. Creditors (including many individuals in Spain, Italy, Germany, Japan, the United States and other countries that had invested their savings and retirement pensions in bonds) denounced the default; This included argentina`s own bondholders, who account for about a quarter of the bondholders affected. [18] In short, if the latter agreement is approved, it would mean that bondholders have made significant concessions to Argentina, saving the state not only money, but also some of its already tarnished reputation and place at the international borrowing table. After the default, Argentina continued to pay its renegotiated bondholders, but not the recalcitrant bondholders, who had rejected a settlement. As Argentina refused to pay recalcitrant creditors at their full value, the recalcitrants first resorted to legal proceedings to seize Argentine government assets abroad – in particular, the central bank`s deposits with the Federal Reserve Bank of New York,[52] the presidential plane, and the ARA Libertad. [7] The Libertad, a training frigate of the Argentine Navy, was arrested (but not seized) in late 2012 at the request of NML Capital for ten weeks in the port of Tema, Ghana, until the International Tribunal for the Law of the Sea unanimously decided to release it. [53] In the end, this approach proved unsuccessful. Holders of recalcitrant bonds quickly discovered that due to a series of sovereign immunity laws, it was impossible to effectively enforce their penalties by seizing the handful of Argentine assets that were still within reach of U.S. jurisdiction.

The private bond group, which had previously agreed to a restructuring, accuses the government of delaying negotiations with the IMF in order to “continue its unsustainable policies even longer”. The first announcement was made at a surprising press conference. President Kirchner said that with this payment, we are “burying a shameful past of eternal and infinite debt.” Many in attendance later called the decision “historic.” ImF chief Rodrigo Rato welcomed this, but noted that Argentina “faces significant challenges.” U.S. Treasury Secretary John W. Snow said the move showed “good faith” on the part of the Argentine government. [44] Nobel Prize-winning economist Joseph Stiglitz has repeatedly criticized the IMF and supported Argentina`s debt restructuring strategies, but rejected the debt relief policy and instead suggested that the IMF should receive the same treatment as other creditors. Local criticism of IMF debt repayment has focused on the costs that have led to the lack of funds for productive purposes in Argentina or to settle overdue creditors; and second, that the government has exchanged cheap IMF loans for new sovereign debt issues at much higher interest rates. [45] After the initial surprise and mixed reactions, local markets recovered, with the MERVAL index growing faster in January 2006 than in 2005 as a whole. [46] (iii) the new USD and EUR 2030 bonds will be amortised in July 2024 and will mature in July 2030, with the first tranche representing half of each remaining tranche; and during the restructuring process, the International Monetary Fund was considered a “preferred creditor”, i.e. all debts were recognized and paid in full. During 2005, Argentina moved from a policy of constant negotiations and refinancing with the IMF to a full payment, benefiting from a large and growing budget surplus due to rising commodity prices and economic performance with the recognized intention of achieving the IMF`s financial independence. [43] In the 2000s, NML Capital`s lawyers first obtained several important judgments against Argentina, all of which were upheld on appeal.

Those judgments concluded that, in the present case, the holders of recalcitrant bonds were entitled to repayment of the full nominal value of the bonds they held, rather than to other amounts such as the reduced settlements negotiated in 2005 and 2010 or the amounts for which they had purchased the bonds. One of Argentina`s largest groups of creditors has sharply criticized the government, criticized the “unpredictable” policies of Alberto Fernández`s government and accused it of dragging out debt negotiations with the International Monetary Fund (IMF). Under the agreement, Argentina will change the payment dates of some new obligations, which will not result in an increase in the total amount of interest payable by the country, but will improve the value of the proposal for creditors, he added. In the tax deal, Argentine lawyers included a standard clause, but did not include a clause on the class action. Pari passu is a term generally used to refer to equality of priority or treatment, and a class action clause would have required all recalcitrants to accept the terms generally offered if enough other bondholders had agreed to accept them. As a result, the recalcitrant realized that while Argentina could not force the recalcitrant to accept the terms of the 2005 or 2010 restructurings, NML could use the pari-passu clause to force Argentina to choose between paying all of its bondholders (including NML) or none of them. The three groups of creditors are known as the Argentina Bondholders` Panel, the Exchange Bond Creditors Group and the Argentine Creditors` Committee. The negotiations focused on the restructuring of approximately $65 billion in debts owed by the Argentine state to these and other bondholders. Mauricio Macri was elected President of Argentina in November 2015. He tried to negotiate with the recalcitrant and put an end to the default in order to return to the international financial markets and benefit the economy. [86] In early 2016, U.S. courts ruled that Argentina must make full payments to four “recalcitrant bondholders” (NML, Aurelius Capital Management, Davidson Kempner Capital Management, and Bracebridge Capital) by February 29.

[87] On February 5, Argentina made an offer of payment of $6.5 billion for the settlement of the dispute and demanded the reversal of the previous decision on payments. [88] Daniel Pollack announced in February 2016 that Argentina had reached an agreement with Paul Singer. The agreement is still expected to be ratified by the Argentine Congress. [86] The agreement would only last until April 14, 2016. [89] Vulture funds held for full payment in legal litigation (hence their common description as “recalcitrant” or “recalcitrant” bondholders). Their legal tactics included seeking injunctions to seize future payments to other bondholders in order to force Argentina to reach an agreement. [2] [23] [25] [26] [27] A similar strategy had already been successfully pursued by vulture funds against Peru and a number of African countries,[27][28] as well as against companies in the United States such as Delphi Automotive, which were forced to pay Paul Singer`s Elliott Management Corporation a yield of more than 3,000% on corporate bonds that had defaulted during the 2008 recession. [29] NML Capital Limited, the main Cayman Islands-based vulture fund in this dispute, is also owned by Singer.

NML paid $49 million into the secondary market for bonds worth $832 million through 2014. [30] Your lobby group, the American Task Force Argentina, is the largest and best-funded opponent of Argentina`s bond restructuring efforts, spending more than $7 million to pressure members of the U.S. Congress and becoming the main campaign donor for a number of them; The most prominent, former Chair of the Western Hemisphere Subcommittee, Connie Mack IV (R-FL), became the lead sponsor in 2012 of a bill that would require Argentina to pay nearly $2 billion to the NML before losing its Senate bid this year. [23] Their lobbying campaign also extends to Argentina, where NML Capital funds an NGO led by Laura Alonso, an MP from the right-wing PRO party. [31] Argentina is currently in talks with the Fund about a new funding program, with the country expected to begin repayments later this year. Economy Minister Martín Guzmán expressed hope that a deal could be sealed by early May, although IMF officials earlier this month expressed doubts about the goal, calling it “ambitious.” For the purposes of this announcement, “Ineligible Holder” means any beneficial owner in a relevant state (as defined below) that is not a “qualified investor” (as defined below) or any other beneficial owner in a jurisdiction where the announcement is not permitted by law or the offer, solicitation or sale prior to registration or qualification under the securities laws of that state. or any other jurisdiction would be illegal. U.S. investment group BlackRock, the world`s largest asset manager, has negotiated with the Argentine government on behalf of three different groups of creditors to whom Argentina owes more than half of its external debt. The 4. In August, Fernández struck a deal with major creditors on the terms of a $65 billion foreign bond restructuring, after negotiations have sometimes been on the brink of failure since the country`s ninth debt default in May. [100] As a result, Argentina was still unable to raise funds in international debt markets for fear that any money collected would be seized by lawsuits; the cost of credit premiums for their country are always above 10%, well above those of comparable countries […].

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