Judgement Left Intact: Vulture Funds

[Rich One]

My point is that it was obvious at the time that the bonds did not have the face value anymore.

Very true but the bonds never had the face value. even before default they traded at a discount!

Individual bondholders of defaulted bonds had no choice but , Use the bonds as wallpaper , or Bend over and accept any offers the Bond issuer . Like 65 % discount.

 

[Gringoboy]

Ed, thanks for clarifying (somewhat), what to me is a very complicated issue.
As for last night, we were a little taken aback by her address to the nation, but in a good way. Even Adriana was impressed and she hates her guts.
I liked the way she was able to spell out, in simple to understand language and graphics, how the original debt actually came about.
In that, she gave us a masterclass in eloquence and communication.
She's a very clever lady.
She says she will pay everyone back, but seemed hesitant to actually say that she would pay the hold out 'extortionists', probably for the very reasons mentioned here.
What can she do?

 

[Hybrid Ambassador]

Ed, thanks for clarifying (somewhat), what to me is a very complicated issue.
As for last night, we were a little taken aback by her address to the nation, but in a good way. Even Adriana was impressed and she hates her guts.
I liked the way she was able to spell out, in simple to understand language and graphics, how the original debt actually came about.
In that, she gave us a masterclass in eloquence and communication.
She's a very clever lady.
She says she will pay everyone back, but seemed hesitant to actually say that she would pay the hold out 'extortionists', probably for the very reasons mentioned here.
What can she do?

Can world tribunal hear Argentina case vs the vulture fund?

 

[dennisr]

And Dennis:

Good point about the CA clauses, but note that they don't cover all Pari Passu cases, as happened when Elliot got huge winnings in cases against Peru and Zambia. The Peru case in particular was a total coup for their lawyers (and this cements it) because it sets the bar at 100% of holders.

And your point is well taken and and all Argentina had to do to avoid this catastrophe was to treat the pricks at Elliot equally: pay the same amount to Elliot as you are paying the settled bond holders. Judge Griesen specifically told Argentina you have to treat the parties equally: New York State law. Full payment was not on the table at that time, only equal treatment. Argentina told the judge to go and pound sand and here we are. There were so many opportunities open to Argentina to avoid this thing and they chose to bet the farm on sovereignty. For ten damn years everyone including President Obama told Cristina, you have got to get this thing sorted out. Tuned to deaf ears.

 

[EdRooney]

Ok, but actually the Argentine gov't made at least 3 attempts to settle with Elliot that were well beyond what they had offered to the other shareholders in the restructuring, but Elliot (wisely it would seem) held out for the full amount. The reason why Argentina did not want to do this is, like I said above, once they pay one bondholder in full, they would be open to being sued by all the other (already settled) bondholders. I know that CFK's supporters like to paint her as Fighting the Man by intransigently refusing to pay the Evil Capitalists, but that's all really just propaganda when measured up to the actual facts.

 

[MDZ]

dennis: I might be misunderstanding the original court ruling but from what I understand the equal treatment means pay to all bond holders no matter if they have new bonds from 2005/2010 or the old bonds from before default. So the consequence would be to pay to the creditors holding the 8% of the old bonds the full value plus interest immediately.

 

[Alicia karr]

I can see both sides thanks to those of you who have taken the trouble to present all this so coherently. I thank you all.

 

[dennisr]

dennis: I might be misunderstanding the original court ruling but from what I understand the equal treatment means pay to all bond holders no matter if they have new bonds from 2005/2010 or the old bonds from before default. So the consequence would be to pay to the creditors holding the 8% of the old bonds the full value plus interest immediately.

No
If you are paying settled bond holders 10% you have to treat unsettled bond holders equally, pay them 10% also. Basically, cannot ignore any creditor. The fly in the ointment at the time for Argentina is they would have to make the account current, payments in the rears because they chose to ignore Elliot. Argentina was not willing to make the account current.

http://www.investopedia.com/terms/p/pari-passu.asp

 

[toongeorges]

2. It should be noted that regardless of what happens with Argentina now, this ruling is a horrible precedent for the entire third world (and elsewhere). There are many countries that would like to be able to reach an amicable restructuring with their creditors, but because of this ruling they will not be able to do so unless they can get 100% of the creditors on board with the agreement.

The third world of course could opt to issue bonds that adhere to domestic law instead of bonds that adhere to US law. Of course, if as Argentina did, a country issues bonds that adhere to US law, then it is a US court and not the country that decides about the restructuring. If Argentina decided to adhere to US law to get better financing options, I find it a weak argument to call Argentina a victim of the US system when it fails to meet its obligations. If you take your argument one step further, Argentina should not be ashamed to ask the US federal reserve to print some extra dollars and send them over.

 

[EdRooney]

OMG that's the best idea yet, since the US is suffering deflationary effects, and QE/ZIRP isn't doing the trick, what could be the possible negatives to printing out a quick $15b (which is pretty much a slow week at the Fed) and giving it directly to Argentina's creditors in payment?

Kills 2 birds with one stone, I love it.