1. ARGENTINA’S NEW PRESIDENT TAKES ON DEBT, DRUGS AND TERRORISM (The Washington Post)
2. JUDGE DEALS SETBACK TO HOLDOUTS IN NEGOTIATIONS WITH ARGENTINA (The New York Times)
3. ARGENTINA IN CONDITIONAL VICTORY AGAINST ‘HOLDOUT’ HEDGE FUNDS (FT.com)
4. ARGENTINA SIGNS, SEALS AND DELIVERS $1B BOND DEAL ON LOOSE LEAF (CNBC.com)
5. AN END IN SIGHT: ARGENTINA WINS A VICTORY AGAINST ITS HEDGE-FUND CREDITORS (The Economist)
6. ARGENTINA RULING TO SUPPORT BONDS AS HOLDOUTS LOSE LEVERAGE (Bloomberg Business)
1. ARGENTINA’S NEW PRESIDENT TAKES ON DEBT, DRUGS AND TERRORISM (The Washington Post)
By Lally Weymouth
21 February 2016
During their joint 12-year rule, Presidents Cristina Fernà¡ndez de Kirchner and Néstor Kirchner isolated Argentina from the world, cut it off from the global economy and drained its treasury. Now the country has a new leader: Mauricio Macri, just two months into his first term, is trying to restore Buenos Aires’s standing. His immediate task is to end a dispute with U.S. creditors that began after the country defaulted on its debt in 2001; American hedge fund managers argued in a U.S. court that Argentina shouldn’t be allowed to pay new bondholders until it paid off the old ones, thus freezing it out of international credit markets. Macri spoke with The Washington Post’s Lally Weymouth in his office in the Casa Rosada, Argentina’s White House, about the economy, Venezuela and alleged Iranian terrorists in the nation’s capital. Edited excerpts follow.
We made possible what was really impossible. At some moment the Argentinian people decided to change and move forward, and lose the ties with our past and to better our future.
Yes, unfortunately they succeeded in isolating Argentina. But the Argentinians have decided that this is the time to move forward. In addition to incredible natural resources, we have unique human resources. Even if what we have inherited from the past government is not the best scenario, it will not stop us from developing the country and fulfilling my principal commitments.
Yes, hundreds of millions. It’s pretty incredible. TV, newspapers and radio.
Exports, imports, outflows, inflows – we have unified the exchange rate.
Yes.
They were afraid it would cause a worse crisis than the one we were suffering. But I was sure that our problem wasn’t the exchange rate. Our problem is trying to reduce inflation. My main commitment that I assumed during the campaign is to gain a country with zero poverty.
Yes, keeping the electricity subsidies for lower-class people and reducing them for the other social levels.
We are trying to solve all the conflicts that we inherited with the world – starting with the holdouts [among the U.S. hedge funds mulling the bond deal]. I am quite optimistic. We have already reached an agreement with some of them, and we expect to reach a reasonable agreement with all of them in the next couple of weeks.
Yes, we have an open and fair attitude to a final agreement; that is what we have already expressed to the [American] mediator named by the judge [Thomas Griesa, a New York federal judge presiding over the case].
Yes. . . . The origin of this inflation is that we had a government that, even though it increased taxes, still accumulated increasing deficits. We are committed to reducing our expenses so as to keep reducing inflation. We expect to come back to one-digit inflation in less than three years.
Now it is at 28 or 30 percent.
That is right. I am ready for a long-term, mature relationship that is productive for both of us. We want to be part of the 21st century. There is no room for isolation. . . . The only people who were damaged were Argentinians. [The day after this interview, President Obama announced that he will visit the country in March.]
In the tough moments that we suffered under the military government here, we had many refugees from Argentina going to live in Venezuela. Venezuela always cared for our human rights. So I am doing exactly what they have done in the past for us.
I am ready to be the voice to defend human rights in the whole world. Argentina wants to be part of the nations that are battling against terrorism and drug trafficking and defending human rights and democracy.
First, we have to recognize we have a problem. The last government always denied that we were having a huge increase in drug trafficking in Argentina. Now we are starting to work seriously on the matter, purchasing radar to control our frontiers. But things are not going to change overnight.
They did the same thing with inflation. They fired the experts who worked at the National Bureau of Statistics and started to declare what they wanted, not what was really going on. Now we are committed to work with the truth. Ruling a country means that you have to be committed to the truth.
In Argentina we are changing to a whole new generation of politicians. They share my idea that Argentina has to be part of the 21st century and has to have an important role in Latin America and the world. Under my agenda of zero poverty and improving the quality of our democracy, many leaders of the opposition are willing to work together.
Both subjects are related. The prosecutor was denouncing the president and her cabinet, saying this [agreement] was illegal. Suddenly, a couple of days after this, Nisman was found dead. So now we have to solve both questions – was Nisman right to denounce the [deal]? Second, why is Nisman dead? His family and others are saying he was murdered. So we need to know the truth. Again, for me, ruling a country is saying the truth.
We are talking about renewable energy in addition to shale gas [and food-prodution]. … Strategic sectors can grow a lot, and we can double our exports in less than 10 years.
The best years for Latin America, yes. It depends on what happens in the future with China.
It affects everybody in the world. But the prices we get, especially for our agribusiness produce, are good.
Yes, but they didn’t build up a long-term relationship. China was a way to solve short-term problems [with currency swaps]. My idea is to transform this relationship in a strategic way. We need to export more value-added products to China, not only commodities. And we can buy from them some of the infrastructure we need.
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2. JUDGE DEALS SETBACK TO HOLDOUTS IN NEGOTIATIONS WITH ARGENTINA (The New York Times)
By Alexandra Stevenson
Feb. 19, 2016
A federal judge presiding over a long-running battle between Argentina and a group of New York hedge funds said on Friday that he would lift an injunction that had locked Argentina out of international markets.
The ruling represents a sharp turnaround by Judge Thomas Griesa of the United States District Court in Manhattan, who had previously prevented Argentina from raising new money or paying its creditors before paying investors holding its defaulted debt.
These investors — known as holdouts — include a group of hedge funds led by NML Capital, a unit of the billionaire Paul E. Singer’s Elliott Management. They have battled with Argentina for more than a decade in a fight that stems from 2001, when the country defaulted on nearly $100 billion of debt.
Argentina later offered twice to restructure the bonds for new and cheaper ones, but the holdouts refused and won a series of victories in the United States courts in recent years. Friday’s ruling now weakens the hand of the holdouts in negotiating with Argentina.
In his ruling on Friday, Judge Griesa said he would drop the injunctions after Argentina repeals domestic laws that prevent the country from making payments to the holdouts and makes full payments to bondholders who settle with Argentina by Feb. 29.
The creditors and Argentina’s previous president, Cristina Fernández de Kirchner, reached an impasse after years of mudslinging and rulings that led the country to default on its debt again in 2014.
Ms. Fernández de Kirchner and her administration called the hedge funds “vultures” and “financial terrorists,” and went as far as denigrating Judge Griesa.
All those years, Argentina “never seriously pursued negotiations toward settlement,” Judge Griesa wrote in his ruling on Friday.
“All that has changed,” the judge added, referring to the newly elected president, Mauricio Macri, who has pledged to resolve the debt dispute as part of a bigger plan to overhaul Argentina’s economy.
In recent weeks, Mr. Macri’s administration has moved to settle with several other holdouts, striking a $1.35 billion settlement with a group of Italian investors, among several other deals. On Feb. 5, after a week of intense negotiations with the group of six holdout hedge funds, it offered to pay $6.5 billion in an effort to put the battle behind it.
Two hedge funds — Montreux Partners and Dart Management — accepted the proposal, which would amount to three-quarters of a $9 billion claim on defaulted bonds.
The four others funds, which include NML Capital and Aurelius Capital Management, a hedge fund run by the former Elliott trader Mark Brodsky, have continued to reject the proposal.
If the court were to refuse to vacate the injunctions now, “it would unfairly deny those plaintiffs the opportunities to resolve their disputes amicably with the Republic,” Judge Griesa wrote on Friday.
He added that “vacating the injunctions serves the public interest by encouraging settlement to resolve disputes generally — particularly such protracted ones — as well as the concern for finality in this particular litigation.”
The ruling is also conditioned on a federal appeals court giving Judge Griesa the green light to go ahead.
“To think that after all that Elliott’s been through, that they could be outfoxed at this late hour — incredible, Macri’s a genius,” said one hedge fund manager who has not been involved in the dispute, but has watched it closely and has investments in Argentina.
Aurelius declined to comment, as did a spokesman for NML Capital.
Argentina had hoped to get the injunctions vacated first, so it could raise new money to pay the settlements it is reaching. But referring to Judge Griesa’s decision that the government pay the bondholders as a condition for his lifting the injunctions thereafter, Yael Bialostozky, the chief spokeswoman for Argentina’s Finance Ministry, said: “There was no surprise here. We keep progressing to close out agreements with the greatest possible number of bondholders.”
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3. ARGENTINA IN CONDITIONAL VICTORY AGAINST ‘HOLDOUT’ HEDGE FUNDS (FT.com)
By Benedict Mander
February 21, 2016
After winning a victory in its decade-long battle with a group of US hedge funds in a New York court, attention now switches to Argentina’s congress.
Judge Thomas Griesa said on Friday that he would lift a controversial financial blockade preventing Argentina’s access to the international capital markets.
The ruling was made on the condition that Argentina repeals laws stopping it from paying “holdout” creditors that refused debt restructurings after its 2001 default on $100bn, and then pays in full those holdouts that reach an agreement with Buenos Aires before the end of February.
The injunction was put in place after the holdouts, led by US billionaire Paul Singer’s Elliott Management, won a legal victory in 2012 in which Judge Griesa ordered Argentina to pay them in full at the same time as holders of restructured debt. The refusal to pay the holdouts by former president Cristina Fernández precipitated the eighth default in Argentina’s history in 2014.
But the victory of the market-friendly Mauricio Macri in November’s presidential elections led to a radical change in Argentina’s approach, with an offer to pay the holdouts $6.5bn earlier this month for claims of $9bn.
“Put simply, President Macri’s election changed everything,” wrote Judge Griesa in the ruling late on Friday, explaining why he was willing to lift the injunctions. “The injunctions must not be turned through changing circumstances into an instrument of wrong,” he added.
Although Judge Griesa currently lacks jurisdiction to lift the injunction immediately due to a pending appeal, the indicative ruling made clear how he will proceed when he does have jurisdiction.
Observers were surprised by the speed of the 85-year-old judge’s 35-page ruling, which came just a day after the holdouts filed lengthy arguments to the court justifying why the injunctions should remain in place, at Argentina’s request. There was no oral hearing despite requests for one by the holdouts.
The centre-right Mr Macri, who is on a mission to attract much-needed foreign investment, must now convince Argentina’s congress to revoke the laws currently preventing payouts to holdouts as requested.
Congress is likely to support Mr Macri, according to Juan Germano, a political analyst, even if there may be a noisy negotiation process. “We are on course to untangle this conflict,” he said.
“For Argentina, this is very important. It clears the way for the solution of the problems we are trying to solve,” said Daniel Marx, a former finance secretary. It will allow Argentina to return to the international stage after a long period of isolation, he said, while enabling the country to borrow at lower interest rates and finance the economic transition that is under way after a decade of populist and interventionist policies.
Nicolás Dujovne, an economist, explained that Argentina’s ability to borrow abroad again would help in its battle to reduce inflation of about 30 per cent, which many analysts see as the biggest challenge facing Mr Macri as sensitive wage negotiations with trade unions begin.
While the previous government resorted to printing money to finance a bulging fiscal deficit, which only fuelled inflation, a resolution to the holdouts saga would enable the government to issue foreign debt instead.
Although a removal of the injunction would put an end to Argentina’s 2014 default and allow it to resume paying the owners of restructured debt, it would not guarantee an end to the dispute with the holdouts, as they could appeal against the judge’s decision. “This may turn into a pyrrhic victory if indeed litigation now swamps further negotiations,” said Charles Blitzer, a former IMF official.
But Mr Dujovne is optimistic, arguing that there is willingness on both sides to reach a deal, and that their positions are not far apart. He said that Argentina was offering a similar deal to the one that the holdouts allegedly accepted before the default in 2014, which the government then withdrew.
“It seems difficult for there not to be a deal,” said Mr Dujovne, venturing that an agreement could even be announced by the end of the month.
If Argentina succeeds in overturning the legislation as requested by the judge and proceeds to pay the holdouts who accept a deal, a lifting of the injunction would weaken the holdouts’ leverage in the negotiations.
But they could appeal against the move, potentially triggering a renewed legal battle that could make what has been dubbed the “trial of the century” for sovereign debt drag on for even longer if a swift deal is not reached.
4. ARGENTINA SIGNS, SEALS AND DELIVERS $1B BOND DEAL ON LOOSE LEAF (CNBC.com)
By Dawn Giel
Saturday, 20 Feb 2016
The 15-year saga of Argentina’s record debt default took a step closer to closure this week with an unusual court filing.
The standoff finally hit a turning point when Argentina ushered in its new president, Mauricio Macri, who vowed to resolve the bitter legal dispute. On February 5, following face-to-face negotiations between creditors and representatives from Macri’s administration, Argentina unveiled publicly a tender offer to pay $6.5 billion—of the total $9 billion—owed to the leading debt holders.
As a result, the South American nation settled a nearly $1 billion obligation with hedge fund EM Limited, one of six major bondholders locked in a long running legal dispute with the country. According to a court document filed this week, the deal was sealed in a decidedly unorthodox way: It was drafted and signed by both parties on a sheet of loose-leaf paper.
“The parties agree to cooperate with each other in all respects to accomplish this settlement and to execute all papers necessary to accomplish this objective,” the document read. It was signed by a representative for EM and Luis Caputo, Argentina’s secretary of finance.
Also included in the document was an email between lawyers representing both Argentina and EM Limited, delineating the settlement amount as just in excess of $849 million.
However, the settlement is subject to two conditions. The Argentine Congress must approve the deal, and an injunction that has been in place since 2012 must be lifted. That clause essentially prevents Argentina from paying existing bondholders of its restructured debt unless holdout creditors are also paid.
The latter condition was given the green light on Friday when the U.S. District Judge overseeing the case, Thomas Griesa, ruled in Argentina’s favor and agreed to remove the injunction—albeit, the ruling is dependent on a federal appeals court ruling.
In 2001, Argentina’s suffered what was at the time the world’s largest sovereign debt default. Although much of that debt was restructured, some of the country’s more aggressive bondholders legally have been battling for full payment in various jurisdictions across the globe for more than decade.
NML Capital, a subsidiary of billionaire Paul Singer’s Elliott Management and one of the six major creditors, even went as far as Ghana to detain an Argentine Naval vessel, the ARA Libertad, in an attempt at repayment.
Another hedge fund, Montreux Partners—who together with EM Limited account for about 14 percent of the total outstanding claims—also accepted Argentina’s proposed settlement terms. Together, both settlement deals exceed $ 1 billion.
Elliott Management declined to comment to CNBC on Judge Griesa’s decision. However, in a court document filed Thursday, the holdout creditors stated that “granting the relief Argentina seeks would simply delay resumption of negotiations by requiring Plaintiffs to return to the Second Circuit.”
5. AN END IN SIGHT: ARGENTINA WINS A VICTORY AGAINST ITS HEDGE-FUND CREDITORS (The Economist)
Feb 21st 2016
A new ruling in New York augurs well for a long-awaited resolution with holdout bondholders
ARGENTINA has had plenty of setbacks in its efforts to resolve its mammoth sovereign default of 2001. Although some of its jilted bondholders accepted a big write-down of the money they were owed in restructurings agreed in 2005 and 2010, others held out for full payment. They enlisted the support of an American judge, Thomas Griesa (the original bonds were written under American law). He not only upheld their claim, but barred any banks with operations in America from facilitating payments on the restructured bonds until the holdouts were paid in full. That prompted a fresh default, in 2014. The Argentine president of the day, Cristina Fernández de Kirchner, railed against the “senile” Mr Griesa and the “vulture funds” he was helping. But Mr Griesa has now done Argentina a favour.
On February 19th Mr Griesa said he would lift the injunction that prevents Argentina from servicing its restructured debts under certain conditions. The judgment is a blow to the remaining holdout creditors, led by Elliott Management, a hedge fund, who had used it to press Argentina for full payment. Mr Griesa’s change of heart stems from a change in Argentina’s government. In December Mauricio Macri replaced Ms Fernández, vowing to resolve the dispute with the holdouts. The new government has already struck deals with some of the curmudgeonly creditors. Earlier this month it settled with a group of Italian holdouts. On February 5th it made a new proposal to the American ones, offering to pay $6.5 billion of their $9 billion claim. Two of the six largest American holdouts accepted the offer. It is a far cry from Ms Fernández’s flat refusal to reward the holdouts in any way for their intransigence. “President Macri’s election changed everything,” Griesa wrote. “The Republic has shown a good-faith willingness to negotiate.”
The latest ruling deprives the remaining holdouts of crucial leverage over the Argentine government and improves the chances of a swift resolution to the debt saga. “It’s the most important development in the last couple of years,” says Juan Cruz Díaz of Cefeidas, an advisory firm. “There is now light at the end of the tunnel.”
The light is still some way off, however. Argentina had sought to overturn the injunction at the Court of Appeals, which will now have to remand the case back to Mr Griesa’s court to enable it to be lifted. And then there are Mr Griesa’s conditions: he wants Argentina to pay those who accept a deal by the end of the month. He also wants the government to repeal legislation designed to block deals with the holdouts. The “Ley Cerrojo” (Padlock Law) was passed in 2005 to prevent the debt-restructuring deal Argentina had just struck from being reopened at a later date. It was suspended to allow for a second restructuring in 2010, but remains on the books.
Repealing the law will be the first big test of the government’s ability to garner support from parties outside its governing coalition. “We’re optimistic,” Marcos Peña, the cabinet secretary charged with liaising with Congress, said in a radio interview on February 20th. “There is an understanding in Congress that we have to resolve this. We’ll start negotiations in the coming days but we’ve been chatting about it for a while already.”
The challenge has become somewhat easier since February 3rd, when 18 deputies from Front for Victory (FPV), the party of Ms Fernández, broke away to form their own, more moderate, “Justicialist Bloc”. The defection means the FPV is no longer the biggest group in the lower house. That will make it harder to block the new government’s proposals. Diego Bossio, one of the defectors, says the bloc wants to work with the new government to repeal the Padlock Law. By exploiting divisions within Peronism, Mr Macri hopes to be able to release Argentina from a dispute which has distracted its politicians for long enough.
6. ARGENTINA RULING TO SUPPORT BONDS AS HOLDOUTS LOSE LEVERAGE (Bloomberg Business)
By Katia Porzecanski, and Bob Van Voris
February 22, 2016
Ø U.S. judge moved to end injunction that hedge funds sought
Ø Bank of America predicts restructured notes will rally
Argentina is on the cusp of returning to international capital markets for the first time since its 2001 default as a favorable U.S. court ruling puts pressure on creditors to settle their legal claims against the government.
Bank of America Corp. said the country’s bonds are likely to rally after a judge agreed Friday to drop orders that barred Argentina from issuing new notes or paying restructured debt, part of a decade-old court battle with hedge funds. The dispute had dragged on growth and left Argentina exposed to creditors’ attempts to seize its assets.
U.S. District Judge Thomas Griesa’s decision means that investors led by billionaire Paul Singer’s Elliott Management Corp. have lost much of the leverage they had to push for better terms in talks over compensation for bonds left over from the $95 billion default. Argentina has already agreed to pay more than $1 billion to other creditors as newly elected President Mauricio Macri makes good on pledges to reach deals that would lure investment and financing to South America’s second-largest economy.
“We expect many more funds to accept the offer now as they are losing much of their bargaining power,” said Jane Brauer, a strategist at Bank of America in New York. “We’ve been overweight Argentina in anticipation that a settlement might take place in the next four to five months, but this is going faster than we expected. We think the bonds have more room to run.”
Griesa’s decision is contingent on the nation repealing laws that bar paying the holdouts, and on the approval of a federal appeals court. If that happens, the injunctions will be automatically lifted as soon as Argentina pays investors who have settled their claims by Feb. 29. Once the injunctions are removed, Argentina will no longer be blocked from paying those investors who agreed to debt exchanges in 2005 and 2010.
Daniel Marx, a former Argentine finance secretary and head of consulting firm Quantum Finanzas, said last week that the country will need to issue as much as $20 billion of debt this year to settle with the holdouts and finance a fiscal deficit.
The country’s benchmark bonds due 2033 have jumped this year to a record 118 cents on the dollar as of Friday. They were little changed on Monday, with the yield up two basis points at 6.36 percent at 6:03 a.m. in New York.
“Argentine bonds can go a bit higher, not necessarily much higher,” said Regis Chatellier, a strategist at Societe Generale SA in London. “The market largely anticipated a positive outcome.” For new bonds, “there should be high demand because carry is still a big decision factor,” he said.
‘Credit Positive’
The nation stopped payments on the securities in 2014 because of the court ruling, which said it couldn’t service that debt without paying the holdout creditors. Argentina owes $3 billion in overdue interest on the restructured bonds, according to Bank of America.
“This is credit positive for the country, which is now just a step away from returning to capital markets,” said Alejo Czerwonko, a New York-based emerging markets strategist at UBS Wealth Management. “The next step will be to get congressional support, which we’re confident won’t be a problem.”
Argentine cabinet chief Marcos Pena said Saturday that the government, provincial governors and lawmakers generally agree that repealing the law is necessary, according to an e-mailed statement. Argentina’s congress reconvenes in March.
Ahead of Griesa’s decision, the holdouts had argued the injunctions should remain in place because dropping them would “upend the negotiations that only now are just beginning in earnest.”
Market Pariah
They also said that Argentina hadn’t spent much time meeting with the bondholders before going public with a settlement offer they called an “ultimatum” that favors some creditors over others. Under the proposal, some bondholders will be repaid 100 percent of their claim, while others will suffer losses of as much as 30 percent.
Michael O’Looney, a spokesman for Elliott, declined to comment on the decision.
Argentina has been a pariah in global markets since the 2001 default. Under President Nestor Kirchner and then his wife, Cristina Fernandez de Kirchner, the government took a growing role in the economy and seized private businesses. By the time Fernandez left office in 2015, the country was seeing anemic economic growth amid a shortage of dollars and inflation that exceeded 25 percent.
Macri, a 57-year-old Buenos Aires native, had campaigned on a pledge to quickly reverse much of the Kirchners’ policies and open up the economy to investment.
“Markets should rejoice on this surprise decision” by the U.S. court, Siobhan Morden, the head of Latin American fixed-income strategy at Nomura Holdings Inc., said in a note. “This marks an end to a historic era.”
TUESDAY
1. BUENOS AIRES ‘ON COURSE TO UNTANGLE CONFLICT’ WITH HOLDOUTS; ARGENTINA: RETURN TO CAPITAL MARKETS (Financial Times)
2. ARGENTINA REACHES SETTLEMENT WITH SEVERAL BONDHOLDERS (Dow Jones Institutional News)
3. PRESS RELEASE: STATEMENT OF DANIEL A. POLLACK, SPECIAL MASTER IN ARGENTINA DEBT LITIGATION, FEB. 22, 2016 (Dow Jones Institutional News)
4. ARGENTINA MOVES TO DROP U.S. APPEAL OVER LOCAL BOND PAYMENTS (Reuters News)
5. ARGENTINA BONDS JUMP AS JUDGE SAYS COULD LIFT INJUNCTION (Reuters News)
6. AN END IN SIGHT; ARGENTINA WINS A VICTORY AGAINST ITS HEDGE-FUND CREDITORS (News Analysis from Economist.com)
7. WILL ARGENTINA’S ECONOMY FINALLY START TO RECOVER IN 2016? (Forbes.com)
8. ANCIENT ARMORED MAMMAL FROM ARGENTINA WAS A HUGE ARMADILLO (Business Insider)
1. BUENOS AIRES ‘ON COURSE TO UNTANGLE CONFLICT’ WITH HOLDOUTS; ARGENTINA: RETURN TO CAPITAL MARKETS (Financial Times)
By Benedict Mander
22 February 2016
New York judge poised to lift financial blockade against the country, subject to conditions
After Argentina’s victory in its decade-long battle with a group of US hedge funds in a New York court, attention now switches to the country’s congress.
Judge Thomas Griesa said on Friday he would lift a financial blockade barring Argentina’s access to the international capital markets. The ruling was made on the condition that Argentina repeals laws stopping it from paying “holdout” creditors that refused debt restructurings after its 2001 default on $100bn, and then pays in full those holdouts that reach an agreement with Buenos Aires before the end of February.
The injunction was put in place after the holdouts, led by US billionaire Paul Singer’s Elliott Management, won a legal victory in 2012 in which Judge Griesa ordered Argentina to pay them in full, at the same time as it paid holders of restructured debt. The refusal by the former president Cristina Fernández to pay the holdouts precipitated the eighth default in Argentina’s history, in 2014.
But the victory of the market-friendly Mauricio Macri in November’s presidential elections led to a radical change in approach, with Argentina offering to pay the holdouts $6.5bn this month, for claims of $9bn.
“Put simply, President Macri’s election changed everything,” wrote Judge Griesa in the ruling late on Friday. “The injunctions must not be turned through changing circumstances into an instrument of wrong,” he added. Although he cannot lift the injunction immediately, as an appeal is pending, the indicative ruling made clear how he will proceed when he does have jurisdiction.
Observers were surprised by the speed of the judge’s ruling, which came a day after the holdouts filed lengthy arguments, at Argentina’s request, justifying why the injunctions should remain in place. No oral hearing took place despite requests by the holdouts.
The centre-right Mr Macri – who is keen to attract much-needed foreign investment – must now convince Argentina’s congress to revoke the laws stopping payouts to holdouts.
Congress is likely to support Mr Macri, according to Juan Germano, a political analyst, though the negotiation process may be noisy. “We are on course to untangle this conflict,” he said.
Daniel Marx, a former finance secretary, said: “For Argentina this is very important. It clears the way for the solution of the problems we are trying to solve.” Once the injunction is lifted, he said, Argentina will be able to return to the international stage after a long period of isolation; it will also be able to borrow at lower interest rates and finance the economic transition that is under way after a decade of populist and interventionist policies.
Nicolás Dujovne, an economist, explained that Argentina’s ability to borrow abroad again would help in its battle to reduce inflation, which is about 30 per cent. Many analysts see this as the biggest challenge facing Mr Macri as sensitive wage negotiations with trade unions get under way.
While the previous government resorted to printing money to finance a bulging fiscal deficit, which only fuelled inflation, a resolution to the holdouts saga would enable the government to issue foreign debt instead.
Although a removal of the injunction would put an end to Argentina’s 2014 default and allow it to resume paying the owners of restructured debt, it would not guarantee an end to the dispute with the holdouts, as they could appeal against the judge’s decision. “This may turn into a Pyrrhic victory if indeed litigation now swamps further negotiations,” said Charles Blitzer, a former IMF official.
But Mr Dujovne is optimistic, arguing that there is willingness on both sides to reach a deal, and that their positions are not far apart. He said that Argentina is offering a similar deal to the one that the holdouts allegedly accepted before the default in 2014, which the government then withdrew.
“It seems difficult for there not to be a deal,” said Mr Dujovne, venturing that an agreement could even be announced by the end of the month.
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2. ARGENTINA REACHES SETTLEMENT WITH SEVERAL BONDHOLDERS (Dow Jones Institutional News)
22 February 2016
NEW YORK—Argentina has reached a settlement with several bondholders for $250 million and €185 million, a court-appointed mediator said Monday as the country continues work toward ending a debt crisis that has damaged its ability to maneuver financially abroad.
The latest deals boost to more than $1.5 billion the amount Argentina has committed in deals since President Mauricio Macri took office on Dec. 10.
Court-appointed mediator Daniel Pollack has announced a string of agreements over several weeks after Argentina announced it expected to pay about $6.5 billion to settle claims of about $10 billion by bondholders, including U.S. hedge funds.
The latest settlements involve bondholders including Lightwater Corp, Old Castle Holdings, VR Capital, Procella Holdings and Capital Ventures International, Mr. Pollack said.
The bondholders refused to swap their bonds at a steep discount when Argentina offered swaps in 2005 and 2010 to ease its financial crisis after it defaulted on $100 billion in bonds in 2001. They went to court instead, winning judgments.
Meanwhile, 93% of Argentina’s creditors accepted the exchange offers, trading their bonds for new ones worth between 25% and 29% of the original value of the bonds.
Mr. Pollack announced the latest settlements the day Argentina asked a Manhattan federal appeals court to drop oral arguments scheduled for Wednesday in one of several cases involving bondholders.
Argentina said in court papers filed with the 2nd U.S. Circuit Court of Appeals that it had decided to drop the appeals since Mr. Macri took office.
Lawyer Michael C. Spencer, representing bondholders involved in the cases set to be heard Wednesday, filed papers late Monday saying a lower-court judge was too eager to vacate court orders protecting bondholders and the appeals court should ensure bondholders remain protected by blocking their dismissal.
Mr. Spencer, saying he represented several hundred people and small-fund bondholders with claims of more than $832 million, complained that Judge Thomas Griesa was rushing to collapse the force of court orders against Argentina.
In a written ruling Friday, Judge Griesa noted that President Macri’s government has consistently declared a desire to resolve its disputes with foreign investors and that the new stance has been welcomed in the U.S., where Treasury Secretary Jacob Lew has commended it efforts.
Mr. Griesa said he recognized Argentina’s “earnest efforts to negotiate and its striking change in attitude” since Mr. Macri took office and was prepared to automatically lift court orders standing in the way of agreements with bondholders as soon as Argentina repeals all legislative obstacles to settlements and once it satisfies the terms of its deals.
“Allowing the republic to re-enter the capital markets will undoubtedly help stimulate its economy and thus benefit its people,” the judge wrote. “It might even encourage other indebted nations to choose compromise over intransigence.”
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3. PRESS RELEASE: STATEMENT OF DANIEL A. POLLACK, SPECIAL MASTER IN ARGENTINA DEBT LITIGATION, FEB. 22, 2016 (Dow Jones Institutional News)
22 February 2016
Statement Of Daniel A. Pollack, Special Master In Argentina Debt Litigation, Feb. 22, 2016
PR Newswire
NEW YORK, Feb. 22, 2016
NEW YORK, Feb. 22, 2016 /PRNewswire/ — Daniel A. Pollack, Special Master presiding over settlement negotiations between the Republic of Argentina and its “holdout” Bondholders issued the following statement today:
As Special Master, I am pleased to report that Agreements in Principle have now been reached by the Republic of Argentina with five other Bondholders for a total amount of approximately $250 million plus 185 million Euros. These Bondholders include Lightwater Corp, Old Castle Holdings, VR Capital, Procella Holdings and Capital Ventures International. I am continuing to work with the Republic of Argentina and all interested Bondholders to help them arrive at Agreements in Principle. These Agreements in Principle, like all others, are subject to two conditions: first, the lifting of the Lock Law and the Sovereign Payment Law, and second, the lifting of the Injunction by Judge Griesa. These Agreements in Principle are all within the framework of the February 5 Proposal issued by the Republic of Argentina, available to all Bondholders. I will have no further comment on this tonight.
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4. ARGENTINA MOVES TO DROP U.S. APPEAL OVER LOCAL BOND PAYMENTS (Reuters News)
22 February 2016
NEW YORK, Feb 22 (Reuters) – Argentina on Monday moved to drop its appeal of a U.S. judge’s ruling that blocked Citigroup Inc last year from processing interest payments to holders of $2.3 billion in bonds issued under the country’s local laws.
A federal appeals court in New York had been set to hear the case on Wednesday. But in court papers, Argentina’s lawyers said recently elected President Mauricio Macri’s administration had decided not to pursue the appeal.
The motion came after U.S. District Judge Thomas Griesa on Friday signaled his willingness to lift injunctions placed on debt payments owed to creditors that participated in past restructurings after the country’s $100 billion default in 2002.
Argentina earlier this month proposed paying $6.5 billion to resolve litigation with creditors that did not participate in those 2005 and 2010 restructurings and had been suing for payment on defaulted bonds.
A key lawmaker and analysts said on Monday that Argentina’s Congress was likely to repeal two laws that have blocked it from settling the litigation, which has hobbled the country’s finances. (Reporting by Nate Raymond in New York; Editing by Lisa Von Ahn)
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5. ARGENTINA BONDS JUMP AS JUDGE SAYS COULD LIFT INJUNCTION (Reuters News)
22 February 2016
NEW YORK, Feb 22 (IFR) – Argentina’s bonds rallied by up to two points on Monday after a favorable ruling on Friday in the country’s legal battle against holdout creditors.
Argentina’s 2033 Discount notes were among the most active on Monday morning, jumping by around two points to 120 in early trading. The 2038 Par bonds, meanwhile, rose by about a point to 65.5, according to a New York-based trader.
Late Friday, the judge presiding over Argentina’s decade-long battle with creditors who did not participate in its 2005 and 2010 restructurings, signaled he would be willing to lift an injunction preventing Argentina from servicing its foreign debt.
The injunction – which was meant to bring Argentina and holdouts to the negotiating table – forced the sovereign to default on its restructured bonds in 2014.
US Judge Thomas Griesa said that it would serve the public interest to lift the injunctions, provided that Argentina repeals two laws concerning its debts and pays all creditors who agree by February 29 to settle.
“It was the first favorable ruling from (US judge) Griesa towards Argentina and took the market by surprise,” said Siobhan Morden, head of Latin America fixed income strategy at Nomura.
A key Argentine lawmaker and analysts said on Monday that Congress is likely to repeal the two laws blocking settlements with creditors, Reuters reported.
Some profit-taking emerged after the early rise in prices with the Discounts quoted at 119 as of 09:00am.
“It’s hard to say (if there is more upside),” said a New York-based trader. “Flows here are two-way.” (Reporting by Davide Scigliuzzo; Editing by Jack Doran)
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6. AN END IN SIGHT; ARGENTINA WINS A VICTORY AGAINST ITS HEDGE-FUND CREDITORS (News Analysis from Economist.com)
21 February 2016
A new ruling in New York augurs well for a long-awaited resolution with holdout bondholders
ARGENTINA has had plenty of setbacks in its efforts to resolve its mammoth sovereign default of 2001. Although some of its jilted bondholders accepted a big write-down of the money they were owed in restructurings agreed in 2005 and 2010, others held out for full payment. They enlisted the support of an American judge, Thomas Griesa (the original bonds were written under American law). He not only upheld their claim, but barred any banks with operations in America from facilitating payments on the restructured bonds until the holdouts were paid in full. That prompted a fresh default, in 2014. The Argentine president of the day, Cristina Fernández de Kirchner, railed against the “senile” Mr Griesa and the “vulture funds” he was helping. But Mr Griesa has now done Argentina a favour.
On February 19th Mr Griesa said he would lift the injunction that prevents Argentina from servicing its restructured debts under certain conditions. The judgment is a blow to the remaining holdout creditors, led by Elliott Management, a hedge fund, who had used it to press Argentina for full payment. Mr Griesa’s change of heart stems from a change in Argentina’s government. In December Mauricio Macri replaced Ms Fernández, vowing to resolve the dispute with the holdouts. The new government has already struck deals with some of the curmudgeonly creditors. Earlier this month it settled with a group of Italian holdouts. On February 5th it made a new proposal to the American ones, offering to pay $6.5 billion of their $9 billion claim. Two of the six largest American holdouts accepted the offer. It is a far cry from Ms Fernández’s flat refusal to reward the holdouts in any way for their intransigence. “President Macri’s election changed everything,” Griesa wrote. “The Republic has shown a good-faith willingness to negotiate.”
The latest ruling deprives the remaining holdouts of crucial leverage over the Argentine government and improves the chances of a swift resolution to the debt saga. “It’s the most important development in the last couple of years,” says Juan Cruz Díaz of Cefeidas, an advisory firm. “There is now light at the end of the tunnel.”
The light is still some way off, however. Argentina had sought to overturn the injunction at the Court of Appeals, which will now have to remand the case back to Mr Griesa’s court to enable it to be lifted. And then there are Mr Griesa’s conditions: he wants Argentina to pay those who accept a deal by the end of the month. He also wants the government to repeal legislation designed to block deals with the holdouts. The “Ley Cerrojo” (Padlock Law) was passed in 2005 to prevent the debt-restructuring deal Argentina had just struck from being reopened at a later date. It was suspended to allow for a second restructuring in 2010, but remains on the books.
Repealing the law will be the first big test of the government’s ability to garner support from parties outside its governing coalition. “We’re optimistic,” Marcos Peña, the cabinet secretary charged with liaising with Congress, said in a radio interview on February 20th. “There is an understanding in Congress that we have to resolve this. We’ll start negotiations in the coming days but we’ve been chatting about it for a while already.”
The challenge has become somewhat easier since February 3rd, when 18 deputies from Front for Victory (FPV), the party of Ms Fernández, broke away to form their own, more moderate, “Justicialist Bloc”. The defection means the FPV is no longer the biggest group in the lower house. That will make it harder to block the new government’s proposals. Diego Bossio, one of the defectors, says the bloc wants to work with the new government to repeal the Padlock Law. By exploiting divisions within Peronism, Mr Macri hopes to be able to release Argentina from a dispute which has distracted its politicians for long enough.
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7. WILL ARGENTINA’S ECONOMY FINALLY START TO RECOVER IN 2016? (Forbes.com)
By Nathaniel Parish Flannery
FEB 22, 2016
Argentina will be an interesting country for investors to watch in 2016. Like the rest of Latin America, Argentina faces a difficult external environment for commodity exports. Argentina posted a $3 billion trade deficit in 2015. Argentina’s northern neighbor, Brazil, continues to struggle as well. General Motors has made the decision to cut automobile production in Argentina. Overall automobile production in Argentina fell by double digits in 2015 with exports dropping by more than 50%. Citigroup also recently announced a plan to sell its retail units in Brazil and Argentina. With a new president who is backed by the business community Argentina seems poised to start a new chapter. On February 19 a U.S. court lifted an injunction that had barred Argentina from issuing new bonds. “Put simply, President Macri’s election changed everything…The Republic has shown a good-faith willingness to negotiate with the holdouts,” Judge Thomas Griesa explained. At the same time, although there are some signs for optimism, Argentina still struggles with some of the worst inflation in the world. Argentine companies have made impressive growth in e-commerce but global online retailers such as Amazon and Wal-Mart still seem to paying more attention to Mexico than Argentina when it comes to e-commerce. To get a sense of what investors should expect from Argentina in 2016 I reached out to Jason Marczak, the Director of the Latin America Economic Growth Initiative at the Adrienne Arsht Latin America Center in Washington, D.C.
Nathaniel Parish Flannery: There seems to be some optimism about newly inaugurated President Macri. How big of a change is Macri from Cristina Fernandez de Kirchner?
Jason Marczak: In electing Mauricio Macri, Argentine voters chose the antithesis of Cristina Fernández de Kirchner. The eight years of Fernández de Kirchner ostracized Argentina from the global economy, while domestically, institutions weakened, insecurity festered, and cronyism ran rampant. Macri promised during the campaign to take the necessary measures—some unpopular—to restore the Argentine economy and to tackle the root causes of the deep malaise pervading across society. He is already acting on this promise.
Ultimately, Macri’s mandate is not just to jumpstart his country’s flagging economy, but to restore credibility to its economic institutions after years of clientelism and abuse of power. Of course, we need to remember that he also faces a litany of domestic, non-economic problems.
Four key decisions by Macri have already improved the administration’s appeal to foreign investors: a repositioning of international ties, a focus on removing capital controls, re-appointment of credible accountants for handling inflation data, and putting in place a well-experienced cabinet of technocrats.
Other long-overdue reforms could help to shed Argentina’s inward-looking, statist model of the past decade and raise its profile in the region. This creates a timely opening for new foreign trade and direct investment. Beyond Argentina, a Macri presidency represents a potential moment for the Mercosur trade bloc to seize upon Brazil’s troubles—turn crisis into opportunity—and become more outward oriented as well.
Parish Flannery: What are the biggest challenges that Macri will face as he works to steer Argentina out of troubled waters?
Marczak: Macri’s biggest challenge will be forging a deal to end Argentina’s long-running legal dispute with its ‘holdout’ creditors who declined to restructure bonds left over from its historic 2001 default. Without an agreement, the country will remain effectively locked out of most international credit markets: it has a limited ability to borrow and its foreign reserves are at a nine-year low. Unlike his predecessor, Macri will probably succeed in striking a deal with the holdouts. Just a few weeks into his term his government made a first formal proposal to end the stalemate with U.S. creditors. Still, he faces a greater struggle selling any deal with the so-called “vulture funds” to both Congress and the Argentine public.
Macri’s narrow electoral victory—a mere 2 percentage points over his opponent, Daniel Scioli—also means the president has limited maneuverability in choosing painful but long-overdue reforms. He will have to balance implementing the necessary economic adjustments while maintaining popular support. This will be his greatest domestic challenge.
Already, the immediate decision upon taking office in December to lift the strict exchange controls brought a 30% drop in the peso. Abolishing the artificially high rate of the peso promises to lure both U.S. dollars and foreign direct investment when both are most needed. The inflated value was not sustainable. But letting the markets decide the currency price brought an immediate political cost right before the Christmas season. More adjustments will mean more short-term pain but with medium- to long-term payoffs.
Parish Flannery: What’s your take on Argentina in the medium term? How to you see Argentina’s economy developing in comparison to the rest of Latin America over the next few years?
Marczak: Compared to Brazil’s indecisiveness in dealing with its own economic challenges, Argentina merits a healthy dose of optimism for medium-term growth. Macri’s has named young and well qualified technocrats. I’m paying attention to people like Finance Minister Alfonso Prat-Gay and Central Bank President Federico Sturzenegger who should be able to work well together while facing daunting internal challenges. Their field knowledge, commitment, and political savviness bodes well for Macri’s chances of effectively moving the currency exchange rate, modifying the pace of fiscal spending, and reducing inflation in the medium term.
It won’t be easy but a revived Argentine economy could outpace its neighbors with investment flowing in to sectors including energy and agriculture. Macri will seek to diversify Argentine trade beyond the agricultural commodities popular with China by bolstering value-added exports. His decision to strengthen frayed ties with the U.S. and Europe will also help to ensure that the economy is not tethered to the volatilities of the Chinese market.
Closer commercial ties with both the United States and European Union, either through a coordinated Mercosur deal or on its own, would consolidate Argentina’s international presence both economically and politically. But inking new commercial deals is not the only way Argentina can show the world that it is open for business. The better business climate that will come with a Macri presidency is emblematic of a wholesale change he seeks to bring about to society. The good of the Fernández de Kirchner era, namely social programs for the needy, is here to stay but what will change is giving institutions back the credibility and independence they once enjoyed.
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8. ANCIENT ARMORED MAMMAL FROM ARGENTINA WAS A HUGE ARMADILLO (Business Insider)
By Will Dunham
Feb. 22, 2016
WASHINGTON (Reuters) – DNA coaxed out of a 12,000-year-old fossil from Argentina is providing unique insight into one of the strangest Ice Age giants: a tank-like mammal the size of a small car with a bulbous bony shell and a spiky, club-shaped tail.
Scientists said on Monday their genetic research confirmed that the creature, named Doedicurus, was part of an extinct lineage of gigantic armadillos. Doedicurus was a plant-eater that weighed about a ton and roamed the pampas and savannas of South America, vanishing about 10,000 years ago along with many other large Ice Age animals.
“With a length of more than three meters (10 feet) from head to tail, it certainly looks like a small car, like a Mini or Fiat 500,” evolutionary biologist Frederic Delsuc of France’s Université de Montpellier, one of the researchers, said.
It was a member of a group called glyptodonts that shared the landscape with giant ground sloths, sabre-toothed cats and towering, flightless, carnivorous “terror birds.” Some glyptodonts made it as far north as southern portions of the United States, from what is now Arizona through the Carolinas.
The researchers were able to place Doedicurus and the other glyptodonts into the armadillo family tree after studying small fragments of DNA extracted from bits of the creature’s carapace. They used a sophisticated technique to fish mitochondrial DNA out from a soup of environmental contaminants that had leached into the fossil over the eons.
They determined the glyptodont lineage originated about 35 million years ago. The oldest armadillo fossil, from Brazil, was around 58 million years old.
Asked what someone might think upon encountering Doedicurus, another of the researchers, evolutionary biologist Hendrik Poinar of McMaster University in Canada said, “That’s the biggest armadillo-looking creature I’ve ever seen, and it has a tail like an Ankylosaurus. Yikes!”
Doedicurus resembles the dinosaur Ankylosaurus, which also was heavily armored and wielded a club-like tail.
The researchers said the resemblance was an example of “convergent evolution” in which disparate organisms independently evolve similar features to adapt to similar environments or ecological niches.
Scientists have debated whether humans contributed to the extinction of the glyptodonts. Poinar said he believed that humans played a role, saying most of the large mammals of that time were under pressure not only from climate change as Ice Age waned but also from human hunting.
The research was published in the journal Current Biology.
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