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Friday, February 13, 2015

London court to rule on restructured debt

President Cristina Fernández de Kirchner meets with billionaire George Soros in New York last year.
President Cristina Fernández de Kirchner meets with billionaire George Soros in New York last year.
President Cristina Fernández de Kirchner meets with billionaire George Soros in New York last year.
Will determine whether those outside the US can still be hit by Griesa ruling

News from the European front of Argentina’s ongoing debt saga is expected today, as a ruling on a case brought forward by George Soros’ fund against the Bank of New York Mellon (BONY) for failing to process the country’s bond re-payments is scheduled for this morning.

A ruling favouring Soros’ Quantum Partners fund and other restructured bondholders’ position could open a rift between the UK and US justice systems.

New York District Judge Thomas Griesa has forbidden any payments of Argentina’s debt from going through until holdouts, which the government calls “vulture” funds, are paid in full.

Soros is joined by Hayman Capital, Knighthead Capital and RGY Investments in a complaint that argues Griesa’s ruling should not apply on European soil.When put together, those investors hold euro-denominated bonds totalling 1.3 billion euros, part of which they were blocked from cashing in when the Bank of New York failed to distribute 226 million euros coming from an Argentine interest payment on June 30.

Back in New York, Judge Griesa has threatened sanctions against any party cooperating with Argentine moves to pay its debt, a warning which is especially relevant for the New York-based bank, which has strictly obeyed Griesa’s orders so far.A ruling from the UK court forcing the bank to comply would leave the BONY in an uncomfortable position, although the bank would still have time to file an appeal and postpone any decisions that could put it at odds with Judge Griesa.

No comparable law

The investment funds suing BONY have argued that their interest payment is governed by UK law, under which there is no injunction comparable to that of New York, meaning that the bank “owes” them their interest payments.

Both Soros and Hayman Capital’s Kyle Bass have somewhat alligned their financial interests with Argentina recently, as they bought shares in state-controlled energy firm YPF while battling BONY in the courts. Soros also met President Cristina Fernández de Kirchner last year, with the future of the country’s promising energy sector high on the agenda.

‘President Kirchner and Mr. Soros discussed a range of topics, including the prospects for Argentina’s economy, recent positive developments in Argentina’s energy and hydrocarbons sector, and drug policy reform in Latin America,‘ said Michael Vachon, a spokesman for Soros, after the September 23 meeting.

Soros’ portfolio also includes a 3.5 percent stake in Argentina’s state-controlled energy firm YPF. Buenos Aires has frequently cited the Hungarian-born magnate’s investments in the country as a signal of investor confidence in the US$490-billion economy.

Bass, meanwhile, has led a group of “distressed” investors which see Argentina as full of undervalued assets, which could bouce back when a technical default is lifted or a more market-friendly government takes the presidency.

“Vulture” funds, such as NML Capital, have so far declined to participate in the British court dates, arguing that eurobondhlders are “abusing” the law by defying Griesa’s orders in a different court.

Herald staff

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