Friday, June 20, 2014


Rumor has it that the Argies are looking for a deal whilst trying to figure out how to get around the rulings of the Second Circuit which were affirmed this week.  The problem is, they may not have any time for either because a payment under their restructured debt is due at the end of next week and if they, they have to pay EMC Capital under the terms of the court ruling.  It's a really tough ruling; so tough that you almost fell sorry for the Argies…nah, not really.  The court got it so right that it has put other institutions on notice that if they assist the Argies in its avoidance, they too could be liable for damages.  Tough.

What has been suggested is that the restructured creditors agree to change the governing law clause in their agreements to Argentine law, thereby removing the subjectivity to the court ruling.  Not gonna happen, and even if it does, it wont fly.  You see, the trustee for the bondholders--the institution that makes the actually payments--is Bank of New York Mellon and there is no way that the institution make those payments unless specifically authorized by the Second Circuit and that ain't gonna happen either.  Further the court would probably view a institution that agreed to change the governing law as being complicit with the Argentines in avoiding the order of that court and denying the rights of EMC  So that, too, ain't gonna happen.  In short, unless Argentina's lawyers can come up with something truly brilliant (and as I have said Cleary, Gottleib/Lee Buchheit are as good as there is), the Argies have been had by the shorts.  It don't get no better than this.

Now if I were in the middle of this thing…and I have hardly enough knowledge of the situation to do more than simply speculate…the best I could hope for would be to get an agreement on the part of the restructured bondholders not to bring suit under the default in exchange for an amount equal to payment required to be deposited in pesos with an Argentine trustee in Argentina in the name of the bond holders.  This is not unheard of and there have been in the past some very useful interpretations of accounting rules that, hopefully, could be brought into play regarding performing debt, because nothing has ANY CHANCE of working if the threat of a write-down, i.e., loss, in any way enters the picture. The Pesos would be non-convertable at the present.   Don't get you much but it does buy time.  More importantly, the U.S. courts probably wouldn't jump up ugly.

Look, at some point, despite how much humble pie they are going to have to eat and the money it's going to cost them, the Argies are going to have to agree to a deal on the unrestructured debt.  What that will look like I have no way of knowing, but there's a number out there somewhere between 0 and 100% plus some kind of interest to which EMC and the others will agree.  I would be willing to bet that the hold-outs have already decided on the parameters.  Turning for a moment from giving free advice to the Argentine to offering some to the hold-outs (which I am sure they don't need),  You got the best decision for which you could have hoped, and the courts, in so delivering it no doubt expect that a settlement will be reached.  Don't go back to court.  These guys get bored looking at the same thing again.  As grandma used to say, you win, pick up the marbles, of which there will be quite a few as we will explain next week.

England went out today as a battling side from Costa Rica defeated I Azzuri 1-nil.  Sadness reigns but we still have the USA on Sunday.   Have a great weekend.

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