December 17, 2017

Interview with attorney specialized on sovereign debt issues Eugenio Bruno

Sunday, July 27, 2014

‘There has been no progress and the situation is stalled’

By Fermín Koop
Herald Staff
The clock is ticking since Wednesday will be the last day for the government to reach an agreement with the holdouts before the 30-day grace period ends. With that in mind, there are still questions that remain unanswered such as what would happen with the RUFO clause if a deal is set and if the country will default or not even though it has already paid its creditors.

In an interview with the Herald, attorney specialized on sovereign debt issues and partner at Garrido law firm Eugenio Bruno says that the situation is now “stalled” and explains that a new stay would only be granted if asked for by the plaintiffs.

What are your hopes regarding the case?

It depends on the parties, not the judge. The Argentine position is that it may not pay or negotiate during the effectiveness of the RUFO clause which is until December 31, 2014. For such reason there are no concrete actions towards reaching an agreement or an agreement to discuss on the part of Argentina. The plaintiffs have expressed their willingness to negotiate, including the possibility of getting paid through a combination of cash and bonds with haircuts and give additional time by way of a new stay but subject on Argentina taking certain actions to show that it is willing to negotiate. Because of this lack of sinergy there has been no progress and the situation is stalled.

Do you think Judge Griesa would be willing to grant a new stay?

I don’t think that Griesa would grant a new stay asked for unilaterally by Argentina. Such a stay has been rejected twice already. A stay could be reinstated only if requested by the plaintiffs. But they are asking concrete actions from Argentina as a condition to make such a request and the government has determined that action of said nature would breach the RUFO clause and therefore will not take them.

Can the RUFO clause be triggered if the government pays the holdouts?

I don’t think so. I believe that there’s a combination of extremely conservative advice from Argentina’s NY counsel that scared the officers and probably the government wants a better deal than paying cash because they know that within a short period of time there would be several other rulings for various billion dollars and therefore it is better to have on place something more sustainable than paying those claims in cash.

If an agreement isn’t reached before Wednesday, will the country default?

Yes, because the money would not be received by the holders of the exchange bonds as it is stated in the trust indenture agreement executed by Argentina and the Bony in 2005 and 2010. The exchange bondholders could sue the Bank of New York but at the end they may also sue Argentina. The situation of course is legally complicated.

Can the holdouts seize Argentine assets abroad soon? There have been rumors lately that they have been asking about YPF.

It’s very difficult because the laws of the US protect sovereign assets. YPF assets would not be attachable because the company is separate from the executive power and is not an alter ego of the Republic (it has a professional management, its own business plan, etc.) which is the basis for attaching its assets.

Without considering the final outcome, how would you describe Argentina’s strategy on the case?

I think there are ways to negotiate without breaching the RUFO. In this regard we put together a set of recommendations on how to deal with it including a waiver of the RUFO clause. We have worked during one year holding conversations with holdouts and exchange bondholders and though that had a solution. Also paying the ruling would not breach RUFO but in this case I understand if the government may not want to assume legal contingencies and moreover I think the government wishes a deal better than paying all in cash. Under our plan the RUFO would be waived and the government could have settled with a combination of cash and bonds with haircuts. Probably they also thought that the ruling from the US Supreme Court would be issued during 2015, after the expiration of RUFO.

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