A Brief recap of the landscape of Argentina and its epic debt battle .....
http://fredw-catharsisours.blogspot.com/2012/11/argentina-tells-elliot-capital-and.html
Here is the state of play now.....
http://soberlook.com/2012/11/argentina-nearing-technical-default.html
SATURDAY, NOVEMBER 24, 2012
Argentina nearing technical default
Argentina CDS spread has blown out to new highs last week. In spite of Argentina's government driving the nation's economy into the ground (see discussion), this widening was caused by increased risks of the so-called "technical default" rather than deteriorating economic conditions.
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| Argentina sovereign CDS (source: JPMorgan) |
For years, bond holders of Argentina's government debt (issued under NY law), who did not participate in Argentina's restructuring plan from the 2001 default, have been fighting to be treated equally (pro rata) with those who had accepted the restructuring terms. But Argentina has insisted that that those who did not play ball in their restructuring plan - the "holdouts" - should get nothing. Last week however a US judge gave Argentina a Thanksgiving surprise by ruling in favor of the holdouts. That means the holdouts will need to be paid everything that the restructuring participants got over the years, including all the interest.
JPMorgan: - Last Wednesday, District Judge Griesa issued his decision in the pari passu ruling ahead of Thanksgiving ... in favor of holdout creditors. Griesa defined a pro rata payment formula that requires full upfront payment by Argentina to holdouts of US$1.3 billion...The judge told Argentina's lawyers that the nation needs to put $1.3 billion into escrow by December 15th, pending the Appeals Court’s ruling. If Argentina fails to do so and the country's appeals process in the US is exhausted, the sovereign CDS will be triggered.
JPMorgan: - A potential refusal by Argentina to comply with an adverse ruling would threaten “technical” default on 2005 and 2010 restructured claims (92% of total debt defaulted in 2001). This would occur if US courts considered the remedy (pro rata payments) adequate and equitable.Based on Argentine government's belligerent behavior toward the rest of the world (see discussion), the odds of the $1.3bn showing up in the escrow account next month are not great. That, combined with the Appeals Court (as well as whatever other appeals Argentina can come up with - possibly appealing to the US Supreme Court) agreeing with Judge Griesa, will put the nation into default - again. By the way, those who still don't think Argentina's government is acting like thugs toward foreigners, just read this story from the Mail.The market-implied peso exchange rate (the so-called "shadow" exchange rate - see discussion) now puts the peso at 42.3% discount to the official rate as the currency continues to decline. Should the technical default take place, the US will begin freezing Argentine government's dollar accounts - which will push the shadow exchange rate to new lows.
and....
http://www.zerohedge.com/news/2012-11-22/all-you-need-know-about-argentinas-upcoming-technical-default
All You Need To Know About Argentina's Upcoming "Technical Default"
Technically, a technical default may still be avoided, but it is now unlikely. As the following presentation from JPM's Vladimir Werning shows, the market has already decided what the "next most likely big picture step" will be. The big question is what the less than big picture next steps will be. And as the following flow chart of options to all "potentially" impaired parties shows, there are quite a few possible steps as the variety of causal permutations has suddenly exploded. For everyone who has gotten sick and tired with following the sovereign default story of one Greece and Spain, please welcome... Argentina, where things are about to get a whole lot more interesting.
Next steps: A nerve-wrecking December for bondholders on all sides.
Risk of “technical default”: Where does it lie within the payment chain and why?
Risk of “technical default”: A payment chain is as strong as its weakest link
Full presentation:
and...
http://www.zerohedge.com/news/2012-11-22/kubler-ross-goes-buenos-aires
Kubler-Ross Goes To Buenos Aires
Argentina's bonds suffered one of their largest single-day price drops on record today as it appears ever more obvious that a re-default will occur. With Elliott still battling over holdouts from a prior life, it seems the smart-money is long-gone this time leaving the momentum-chasing yield-grabbing flow suddenly fully cognizant that the bonds are in fact dead. 'Acceptance' is upon us as we wrote a month ago: "As for the Argentina vs Elliott bare-knuckled match, enjoy it while you can: very soon the Latin American country will likely proceed with yet another round of creeping selective defaults, exchange offers, consent solicitations, and other debt reorganizations, which will make the current free-for-all into a total and epic labyrinth of creditors, interests, bondholder classes, general unsecured claims, and other total confusion."
We continued:
After all why bother with Argentina: there are far higher IRRs to be generated byshorting local-law Spanish bonds while buying their international-law cousins. In fact, courtesy of the current government's arrogance and naivete, the position can be put on in a cost, and carry, neutral basis. Then sit back and just wait for the spread to blow out.
Because what is happening with Argentina today, is coming very soon to every banana republic near you.
Elliott Management Vs Argentina Round 3: The Showdown
Submitted by Tyler Durden on 11/22/2012 - 09:27Bond CDS China Creditors default Iran RedefaultsReuters Sovereign Debt Turkey
Most recently, in "Elliott Management Vs Argentina Round 2: Now It's Personal" we laid out the story of how in the ongoing legal fight between Argentina's prominent distressed debt creditor, and exchange offer holdout, Elliott Management (and to a smaller degree Aurelius), and distressed debtor Argentina, the moving pieces continue in flux, even as various US legal institutions have demanded that Argentina proceed with paying the holdouts despite the Latin American country's vocal prior refusals to do so, and most importantly, the lack of a sovereign payment enforcement mechanism. Last night, the fight escalate one more, and perhaps final time, before the Rubicon is crossed and Argentina either pays Elliott, "or else" the country proves all those who furiously bought up Argentina CDS in the past two weeks correct, and the country redefaults on $24 billion of debt. Because as Reuters reports, late last night, US District Judge Griesa overseeing the Argentina case, ordered the Latin American country to make immediate payment with a deadline for escrow account funding of December 15.
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