Creditors who own Argentina’s restructured 2005 and 2010 exchange bonds whose interest payments have been blocked
by United States District Court Judge Thomas Griesa will be able to
swap them for domestic bonds, President Cristina Fernández de Kirchner
has announced. The exchange bonds were negotiated under American and
European laws during Argentina’s sovereign debt restructuring
proceedings, but the new local bonds will be governed by Argentinean law
and thus bypass the US court injunction. The country’s refusal to
comply with the order led to it entering default status on July 30.
Economy Minister Axel Kicillof had anticipated this
maneuver two months ago. President Fernández de Kirchner announced the
news on national television on Tuesday night and Judge Griesa has
threatened to hold Argentina in contempt for violating the court’s
ruling. The injunction requires the South American country to pay the
“vulture funds” – creditors who refused to take distressed exchange
bonds – before it pays its conciliatory bondholders. The court’s
contempt may carry certain fines but Argentinean cabinet chief Jorge
Capitanich said the judge has yet to explain the possible consequence of
such a declaration. Guillermo Nielsen, former finance minister under
President Néstor Kirchner (2003-2007) during Argentina’s debt
restructuring process, said a declaration of contempt would exclude
Argentina, its provinces and its businesses from the international
financial sector for years.
US District Judge Thomas Griesa has threatened to hold Argentina in contempt, a decision that may carry certain fines
Still, the South American government said it must meet its
obligations to 92.4 percent of its creditors – the ones who accepted the
distressed exchange bonds in 2005 and in 2010. The administration plans
to submit a bill to Congress on Wednesday to offer unpaid bondholders a
voluntary exchange. “It’s an option, not an obligation,” the president
said. Some American funds are subject to internal rules that do not
allow them to buy shares without legal oversight in their own country.
But in light of Argentina’s default, some of them may choose to sell
their bonds to other companies that are not subject to the same
restrictions.
Congress will debate the bill and the government expects
the backing of an absolute majority in both houses, though some deputies
have wavered in their loyalty in the last few days. On Sunday,
Fernández lost the support of Río Negro Governor Alberto Weretilneck. He
announced his endorsement of a rival Peronist, Sergio Massa, for the
2015 elections. Consequently, Fernández chose to emphasize the need for
unity among the country’s politicians, saying that the nation’s
“sovereignty” was in peril.
The president’s initiative calls on the Economy Ministry to
find new mechanisms so that creditors may receive their past due
interest payments. Fernández authorized the ministry to remove the Bank
of New York Mellon, the country’s middleman in the disbursement process.
Instead, payments will be made at the central bank or through another
entity recommended by bondholders.
The bill also offers debt swap deals to the 7.6 percent of
investors who had rejected them in 2005 and in 2010, including the
so-called “vulture funds.” Fernández said her detractors accused her and
the Economy Ministry of “inexperience” in negotiating with speculative
investors. But, she added, local and international banks that tried to
strike a deal with the litigant funds in the last few weeks have also
failed.
The president was emotional during her speech, on the verge
of tears as she remembered her late husband and talked about the 2005
restructuring process. “I am a little nervous. Forgive me. I really feel
like we are experiencing a very big injustice.” She talked about the
backing she has received across Latin America and from more than 100
American academics, saying that those shows of support were not for
Argentina itself but because of “this crazy desire to destroy the most
successful debt restructuring process, which promoted inclusive [social]
growth” after the political and socio-economic collapse of 2001.
She reminded viewers that the Obama administration had
called Griesa’s ruling “excessive.” Hours before, Foreign Affairs
Minister Héctor Timerman said the United States did not formally respond
to Argentina’s complaint before The Hague. A US State Department
representative said the administration would not accept that
jurisdiction
No comments:
Post a Comment