By Bianca Fernet, Argentina,Bianca@bubblear.com. Cross posted from The Bubble
Argentina’s infamous “vulture funds”, as the holdout creditors represented by Paul Singer’s NML Capital are affectionately known, are back at their usual antics of trying to claw back from the Argentine government what they (and the US court system) see as rightfully theirs.
But these holdouts lost a critical battle last week in the courts of the United Kingdom, where London Judge David Richards ruled that the Bank of New York, rather than Argentina, was responsible for not making payments on Argentina’s bonds issued under UK law. In the eyes of the British court, Argentina has made the payment and the onus of distributing the funds to the bondholders falls on BoNY.
This ruling does not obligate the New York bank to process the payment, which would put them in between the rock and the hard place of obeying one court or the other. It does, however, clearly state the opinion that Argentina is most unequivocally not in default. This will allow Argentina to issue debt in the United Kingdom at lower than 10 percent interest by reducing the risk premium investors place on the country.
The holdouts continue their onslaught in both the courts of public opinion and the court of the State of California. The American Task Force Argentina (ATFA) group published an “Index of the Enrichment of the Argentine Government” detailing the alleged enrichment by corruption of 14 current and former government members. This report uses public domain tax and official statements, simply presented in a pointed manner that has been decried by Economy Minister Axel Kicillof as “mafia tactics that will not work.”
In the State of California, Circuit Justice Jeffrey Steven White has agreed to hear NML’s argument that the application of the “discovery” clause should extend to oil company Chevron’s assets. Quite a jump, yes?
The reasoning is that via Chevron’s joint venture with state-owned YPF in Vaca Muerta, Chevron’s assets necessarily both indirectly and directly contain funds from the Argentine state and should thus be frozen. This case has an ice cream cone’s chance in hell of going anywhere, but puts strain on Argentina as it dissuades future investment in the country from American firms as well as mucks up their relationship with Chevron, as no one save lawyers relish expensive, long, painful lawsuits that could result in losing millions of dollars.
To sum up, the vultures want everyone to know they’re still a thing and are after Chevron, the government still steals money and pretends it doesn’t, and the U.S. looks to be alone in viewing Argentina’s lack of settlement with the vulture funds as a default.
A Reuters article reporting on the UK court decision contained this paragraph:
Let’s translate ‘eventually’ as meaning ‘at least one year from now.’ Argentina elects a new president in October, who probably will step in to resolve the epic mess left behind by the Widow K., who ends her term mired in a murder mystery which could yet result in her criminal indictment.
No bank in their right mind would underwrite fresh Argentine debt until the country has new leadership. Since the RUFO clause (last year’s excuse for not negotiating) expired, the Widow K’s stance has shifted to ‘can pay, won’t pay is my political legacy.’
I’m working on a biography tentatively titled Requiem for a Flake, but need the talented Bianca Fernet as a coauthor.
As bumbling and inept as Kirchner seems, she has at least accomplished one thing – standing up to the NY hedge fund billionaires and extending a big fat middle finger in their direction.
The vultures are spending quite a bit of their own capital in a propaganda campaign to convince Argentinians to settle. I wouldn’t put it past them to spend some “walking around money” on local “talent” who may have played a role in Nisman’s death, in order to frame CFK. There is too much money at stake for these thugs.
Nisman’s case relies on the same walking bullshit pile who tried to sell Iraq war WMD lies. It was and is a farce.
I support the elected government of Argentina against the Vultures.
It seems no one mentions the real losers in this mess – the original bondholders who accepted a massive haircut. They are the ones with their funds tied up by the vultures – even after they accepted massive losses. I for one see Ms Kirchner as the hero in this little vignette – and I suspect the Argentine people did too – until the murder mystery she’s entangled in. Thanks for keeping us informed.