Countdown To Default!

[ajoknoblauch]

If the Argentine Republic does not pay it's bondholders (including the holdouts - Buitres) by this Wednesday in accordance to US Judge Griesa the Republic will default. Many US papers are reporting this as a belligerent Argentina refusing to pay it's debts, again. However, that is far from the whole story and, I think, quite simply inaccurate.

The Republic is arguing that it cannot legally negotiate with the holdouts because that would trigger the RUFO clause. This clause prevents The Republic from offering a better deal to the holdouts than they offered originally to the bondholders who accepted the new payout terms. In other words, if Argentina pays more to the holdouts than they pay the other bondholders then they can be taken to court for violating the terms of the agreement. That could be Billions of Dollars at stake.

But ... if The Republic does not pay according the court order it will default. If The Republic defaults that will trigger acceleration clauses in all of it's foreign law bonds. That risks court action in multiple jurisdictions and Billions of Dollars at stake.

This could be a decision of the lesser of the two evils which, at this point, appears to be to default.

What's a good Republic to do? What do you think will happen on/or by Wednesday?

GS

Whar "good Republic" is involved in this?

 

[French jurist]

Regarding ARBound options above, I'd subscribe to 3.

From our point of views, we just know like 5% of what's being really negotiated, it's like Plato's Cave, we can just assume from what we perceive.

Of course the RUFO clause in an easy excuse, but even if the risk is tiny, it's not worth to take it (would you play Russian roulette for 10 million dollars?).

There are many parties involved now, good thing for Argentina.

I wish I could read Griesa's mind now that he's heavily criticized for his ruling (NY Times, Professors of Law, etc.), and because (that's not US bashing) his decision also affects US interests (not even mentioning that the CA & the SC may have not played fully their roles).

If Argentina defaults technically (even though, this will be discussed...)? Well, let's think the reverse way: if Argentina would pay, the reputation of the country won't get better suddenly of course. No real difference between being rated CCC- or CCC+ (or whatever the rating: small difference in bond yields which will remain, no matter what, very high).

On Argentina's side, a few positive things to consider:
- Whether some people like it or not, Argentina has constantly paid since the default (aside of the Vulture aspect).
- The Club de Paris has been/is being reimbursed 100%
- Once YPF/Repsol was renationalized, the bond payment mechanism was put in place quite quickly if I recall (didn't recheck)
- If there's a default, the Vultures will lose one of their main weapons (of course, they'll keep on trying to seize things here and there, but mainly in the US since, for example, the French Cour de Cassation denied them the possibility to seize money in France in a decision which could be considered as... weird... Somehow)
- Other Financial centers (mainly London) will be more than happy to handle more of future sovereign debt restructurations
- Vaca Muerta sheds a new light on the story: it's like if a recalcitrant debtor was soon to receive a very big inheritance = forget the past then, future is too bright.

etc.

I wouldn't bet nothing about what will happen in 2 days... I just hope that will be the best outcome for the Argentines.

 

[French jurist]

Very Argentine... No pasa naaaddddaaaaa :lol:

http://www.lanacion.com.ar/1713746-oscar-parrilli-sobre-el-posible-default-no-va-a-pasar-nada

 

[Bajo_cero2]

Yes, and it appears that he didn't fully understand the issue and the implications of his ruling. The RUFO question is whether an agreement or payment by the Republic to the holdouts can be seen as involuntary. If it is involuntary then RUFO isn't triggered.

Judge Griesa had the opportunity to create a win/win for everyone (including the holdouts) by postponing a decision until after December 31st. Instead, he ordered payments to everyone and created an entanglement that no one - not even he - knows how to get out of.

Touchee!

 

[gpop]

Just today I have to update my paid software updates... in US funds... from a latam branch... :angry: I just know that the CC bill will be not only charged with the 35% but with a hefty exchange difference on the bill witch will arrive next month!

I'm getting woozy @$@#^#$T#$@!

 

[ajoknoblauch]

Meanwhile, today's dólar blue reaches the lucky 13.

 

[French jurist]

Meanwhile, today's dólar blue reaches the lucky 13.

Wow how surprising

 

[ghost]

Regarding ARBound options above, I'd subscribe to 3.

From our point of views, we just know like 5% of what's being really negotiated, it's like Plato's Cave, we can just assume from what we perceive.

Of course the RUFO clause in an easy excuse, but even if the risk is tiny, it's not worth to take it (would you play Russian roulette for 10 million dollars?).

There are many parties involved now, good thing for Argentina.

I wish I could read Griesa's mind now that he's heavily criticized for his ruling (NY Times, Professors of Law, etc.), and because (that's not US bashing) his decision also affects US interests (not even mentioning that the CA & the SC may have not played fully their roles).

If Argentina defaults technically (even though, this will be discussed...)? Well, let's think the reverse way: if Argentina would pay, the reputation of the country won't get better suddenly of course. No real difference between being rated CCC- or CCC+ (or whatever the rating: small difference in bond yields which will remain, no matter what, very high).

On Argentina's side, a few positive things to consider:
- Whether some people like it or not, Argentina has constantly paid since the default (aside of the Vulture aspect).
- The Club de Paris has been/is being reimbursed 100%
- Once YPF/Repsol was renationalized, the bond payment mechanism was put in place quite quickly if I recall (didn't recheck)
- If there's a default, the Vultures will lose one of their main weapons (of course, they'll keep on trying to seize things here and there, but mainly in the US since, for example, the French Cour de Cassation denied them the possibility to seize money in France in a decision which could be considered as... weird... Somehow)
- Other Financial centers (mainly London) will be more than happy to handle more of future sovereign debt restructurations
- Vaca Muerta sheds a new light on the story: it's like if a recalcitrant debtor was soon to receive a very big inheritance = forget the past then, future is too bright.

etc.

I wouldn't bet nothing about what will happen in 2 days... I just hope that will be the best outcome for the Argentines.

I have seen Vaca Muerta as the great opportunity for Argentina to rise above the past and move into her potential. But then I look at the OPEC countries and Argentina's past performance regarding capital utilization and infrastructure management and Hope wanes with a huge sucking sound.

 

[cbonanni]

Irregardless of the outcome of the negotiations and subsequent results , What has become apparent with this case is the inability of a nation to be able to declare bankruptcy. This avenue of restructuring debt via bankruptcy is available to individuals and companies , however , not to countries.

Perhaps the IMF , Paris Club , World Bank should find an alternative to default , and create a way for Nations to re negotiate debt.

 

[French jurist]

Not sure if that's plainly relevant, but the CDS are still way much lower than what they were 40 days ago.
Default or not default (we don't know everything... Especially the possible talks with the Club de Paris, although I don't know which mechanism could be put in place)?