Argentina loses $1.3bn debt court appeal

[Bosonic]

Source: BBC

Argentina has been told again it must pay back more than $1.3bn (£830m) to a group of investors - 12 years after its record debt default.

A New York appeals court unanimously rejected every Argentine argument against the payout.

The decision is the latest twist in the long-running legal saga.

Argentina refuses to pay anything to investors who declined to participate in a previous debt reduction deal involving most of the nation's lenders.

Read more: http://www.bbc.co.uk/news/business-23832247

[dipsydoodle]

1. the judges said in their decision......

"What the consequences predicted by Argentina have in common is that they are speculative, hyperbolic and almost entirely of the Republic's own making,"

[COLGATE4]

2. Wait for the howls from the anguished

Cristina supporters in 3 - 2 - 1...

[Hotsauce]

3. Hollow victory

The only anguish here is Singer's, who knows full well that while he could have accepted Argentina's offer and net a 400% return (about $250 million on a 48 million-dollar investment), he won't collect anything now since payments to the 93% of bondholders he seeks to harm can be put through European banks and no other country's judiciary has or will side with these vultures. Parker's ruling, which puts "what NML bargained for" above every other bondholder's rights and above the law, is basically tailor-made for Singer in much the same way the "irreparable harm to Bush" excuse in Bush v. Gore was tailor-made for Dubya.

So come now, Judge Parker - how much is Uncle Paulie paying you? More than Griesa, I hope.

The fact is, Singer has been rebuffed in every European court in large part because it's no secret that his Caymans-based NML needs to force Argentina to default against ALL bondholders in order to COLLECT INSURANCE. It's a real sign of the times when you have a payor being sued to STOP PAYMENT by a payee who would otherwise clear a 400% profit; but it makes sense when you remember that NML stands to make up to five times that much by way of an insurance payout, tax-free.

They have no choice, really, because since 93% of bondholders accepted debt swaps in 2005 and 2010, the 7% that held out are legally obligated to accept the same terms (the threshold is usually 70%); it's worth noting that those that took the 2005 deal have already seen the value of their bonds jump from 30 ¢ to 75 ¢ on the dollar, plus interest.

Argentina spends $7 billion a year paying them, and if the good-faith bondholders can't collect through BONY-Mellon (as they have up to now), I'm sure BNP Paribas will be happy to get the account.

As for Paulie Singer - he'll be alright. NML (whose clients include tax cheats like our old friend Romney, and any number of terrorists and kingpins) is protected from any U.S. taxes or oversight - and thanks to Citizens United, Singer has half the GOP caucus in his pocket. All that, and he still has the $1.4 billion in free TARP money to brag about.

Does anyone here think he'll repay the ever-generous U.S. taxpayer if he cashes in on the default insurance?

Fehgetaboutit!

[Tuesday Afternoon]

4. Welcome to DU, Hotsauce!

[Hotsauce]

12. Thank you

Happy to be here.

[branford]

5. There's a reason why BNY Mellon in NY is a defendant . . .

Carefully read the pleadings, particularly concerning matters of injunctive relief.

Also, regardless of your (or my) opinion of the plaintiffs, or ridiculous allegations of court corruption (note the bonds have a choice of law and forum clause that specifies NY), neither the United States generally, or NY in particular, will cease being the primary locus for much of international finance.

I imagine that Argentina will seek review by SCOTUS, but will not ultimately prevail. I foresee a general default on all the bonds, and Cristina again acting the poor victim.

If she keeps this up, by the time this saga is over, her economic leadership will result in a loaf of bread costing $100 in Buenos Ares, and further isolation from necessary international financing.

If things get really bad, maybe she can invade this small island not far off the coast . . .

[Hotsauce]

6. And there's a reason I didn't bring up SCOTUS...

...because with its current makeup I have no illusions whatsoever as to what the "ruling" might be - and as Justice and Mrs. Thomas can tell you (no doubt many others as well), court corruption is VERY MUCH the order of the day in today's U.S.

Not that any of it matters, because no other country's judiciary has recently, or will, indulge offshore hedge funds in their bid for a 2000%+ windfall, however much you thump your chest about "the United States being the primary locus for much of international finance." And certainly not when Argentina's offer of reopening the 2010 swap - even to Paul Singer - still stands.

This dispute, of course, is hardly news - nor is the risk of a court-manufactured default against the 93% of bondholders who are being paid, a risk already priced into the market. Foreign bondholders will probably be only temporarily inconvenienced though, because the payments agency and clearing services can be transferred to Western Europe or other venues that still enjoy more legal certainty and rule of law than our dear old U.S. does for now.

Speaking of small offshore islands, your favorite little laundromat - the Caymans - was forced just days ago to become subject to the Foreign Account Tax Compliance Act (FATCA). Your friend (and employer?) Mr. Singer did not comment, but unnamed sources claimed to have heard him say:

"What? Me worry?"

[branford]

7. My primary interest in the story is academic,

since I'm a commercial litigator in NYC and I find some of the legal maneuvering very interesting. And before you ask, I both represent and bring cases against big-bad-evil corporations. I also have little sympathy for Cristina. Her actions economically and politically have been corrupt, self-serving, resulted in a bad and worsening economic situation in Argentina, and are most decidedly not liberal. When choosing between Kirchner and a vulture fund, I find it difficult to ascertain any likable or sympathetic figure.

You should additionally realize that the Second Circuit, the federal appeals court that issued the ruling, is one of the most liberal in the country, has a great deal of expertise in international financial matters due to where it sits, and the decision was a unanimous 3-0 against Argentina.

You apparently confuse issuing a decision in accordance with the clear terms of the law as corruption. You are free to have any opinion you wish. However, no one forced Argentina to issue bonds subject to the laws of the United States and New York. I will say that only a fool would purchase significant Argentinian debt subject to the laws and courts in Argentina.

I also pointed out BNY Mellon because they are the bond trustee, are located in New York, and control or have access to funds necessary to pay all the bondholders, including the plaintiffs. The plaintiffs therefore have an avenue to collect much, if not all, their money.

Your opinion on vulture funds might be worthy of discussion as a general matter, but largely irrelevant to this case. This matter was, in essence, a simple contract dispute, albeit with larger financial policy implications. It does not matter if the plaintiffs were saints or evil incarnate, rich or poor, the Court ruled under the terms of bonds, a contract freely entered into by Argentina and the bondholders. The law does not change because you find the plaintiffs unsympathetic. Such a path would be very dangerous.

If Argentina ultimately loses, which appears likely, the primary result will be that international bond terms and insurance will alter to reflect the court's decision, and countries will be more circumspect when issuing public debt or settling claims in default.

[nolabels]

9. So the main scope is to keep the US as part of the primacy of what financial decisions can be made?

Keeping and making Argentina an example of what happens when you check out the global money cabal is what it looks like to me.

[branford]

10. No, it is to enforce a contract that was freely entered into by Argentina,

regardless how you or I may feel about the "global money cabal."

[Hotsauce]

14. Upending bond market laws and forcing default on 93% of bondholders, just to cash in on insurance.

It's either just as you say, nolabels, or bribes are going around like crabs in a frat house (probably, both).

Unfortunately for Paul Singer and his Caymans laundry, his dreams of fleecing Argentina and his default insurer of $1.3 billion (on a 48 million-dollar investment, btw) is stepping on the toes of powerhouses like BNY Mellon and Clearstream, for whom handling foreign bond payments is very big business. Not to mention almost the entire sovereign bond market, which relies on the same 'pari passu' ("equal footing&quot laws now being flouted by U.S. courts at Singer's behest; our friend Mr. Singer, you see, needs to force Argentina to default against almost everyone else in order to collect on a 1.3 billion-dollar insurance policy.

The $1.4 billion he collected from TARP was obviously not enough.

[nolabels]

16. Yea but those are the smaller fish

Those bigger fish are just laughing their way to the bank. You see those bigger fish they will let the dust settle no matter how messed up things get then latter will just point their finger and say " do you want to end up with that kind of mess on your hands". There is a kind of gangster mentality going around and it's like do business with us, like we say or you will be next. No matter who did what or who was a fault, it the idea of how the gangster works. Singer is playing his role of bad cop for them and they like it like that.

[Hotsauce]

17. You're probably right.

Fortunately for the good-faith bondholders, no court in Europe will endorse this arbitrary and (by Parker's own admission) legally unfounded ruling. This will eventually allow the bond payments agent (for non-Argentine bondholders) to be transferred to Europe, presumably Paris or Frankfurt.

But are we right to assume that BNY Mellon will let this stand - particularly when much of the rest of its multi trillion-dollar sovereign bond business might migrate there also? Or that Clearstream, the world's premiere securities clearing house, will surrender the keystone legal certainty of 'pari passu' ("equal footing&quot laws for Singer's personal benefit?

[Hotsauce]

11. Ah! A corporate lawyer.

So you do criminal law, then. That explains a lot, starting with all the straw men, canards, and self-contradictions in what you just wrote. I especially like how you start by feigning academic detachment, after all your snarky ignorance about Argentina. Good job, also, ducking the fact that far from relying on ANY law at all, the Griesa/Parker rulings go so far in placating these vultures that they presume -as you yourself admitted in your last paragraph- to rewrite and jeopardize virtually the entire global payments system as well. All so a Caymans launderer can collect a billion-dollar default insurace payoff?

''The law does not change because you find the plaintiffs unsympathetic," says Branford, "it would be very dangerous.'' But...''if Argentina ultimately loses, which appears likely, international bond terms and insurance will alter to reflect the court's decision.''

TRANSLATION: if NML can't get the 2000% windfall they demand, the law will simply be rewritten to keep Argentina, the Bank of New York, and Clearstream from contractually paying the bondholders, as they have since 2005 in most cases. Screw the 93% of bondholders and the world's bond market itself - Paulie Singer needs to cash in on default insurance, don't-cha-know.

THAT, my friend, is the kind of arbitrary jungle lawlessness that tells the world that, far from the "last best hope" of old, the rule of law no longer really exists in the U.S. - not where it counts most. How long do you think the world's 80 trillion-dollar bond market will take to seek judicial security elsewhere? European courts have already sent Singer and his ilk packing -and Lower Manhattan is not the world, you realize. And how long do you think BNY Mellon and Clearstream will stand by and let a Caymans criminal extort them?

They say that when people whine about "the principle, not the money" - it's THE MONEY. And seldom have I seen this play out as brazenly as I have just now; it seems many of our fellow readers here at DU have noticed the same thing.

[branford]

13. Wow. You are unhinged!

To the extent is makes any difference, I'll respond to a few points:

I am a corporate litigator. I've both represented corporate clients AND I have brought successful claims against corporations. As an attorney, I was interested in many of the legal maneuvers employed by both sides, particularly as it is rare to see a country as a defendant in a financial action.

My initial comments also only referred to the legal issues. I then responded to you screed about the vulture funds by suggesting that Argentina, and Cristina Kirchner in particular, are no innocent lambs. If your standard of who should lose a legal dispute is who is the most "evil," I'm not sure who would prevail in a contest between Argentina and the vulture funds.

I can repeat my legal analysis, but it will be to no avail. You have already decided that the plaintiff, the vulture funds, represent such an unmitigated and intrinsic evil that they must not win, no matter the terms of the contract (the bonds), the legal merits of the case, or the fact that the Court's decision will only likely effect Argentina and they can afford to pay on all the bonds. I also find it most disturbing that you appear to justify Argentina's potential default on all the bonds simply to avoid paying the plaintiffs.

We live in a nation of laws. When deciding the merits of a case, it does not matter if a party if "good" or "bad," rich or poor," even native or foreign. Your irrational hatred of the plaintiffs has left you unglued.

Even after this case is long forgotten, countries will successfully participate in the international bond market. They will learn the lessons of Argentina's arrogance and mistakes, maybe draft bond agreements a little differently and be more circumspect with public finances. However, life will go on.

[Ash_F]

8. Now that's a first post.

Welcome.

[Hotsauce]

15. And what a nice compliment.

Much obliged, Ash.