Will All, None, Some Argentine Defaulted Debt Bondholders Get Paid?

Summary: February ended with large Argentine defaulted debt bondholders accepting Argentina’s big offers, but March starts with small bondholders still left out.

The March 1, 2016, hearing brought together lawyers for two groups of investors: DealBook @dealbook via Twitter March 1, 2016

Fifteen lawyers are awaiting a decision after a hearing March 1, 2016, in United States District Court in New York regarding paying all, none or some of the Argentine defaulted debt bondholders.

The hearing brought together lawyers for one group of investors that are called exchange bondholders for participating in two restructuring offers, in 2005 and in 2010. Lawyers at Tuesday’s hearing called the other group of investors holdouts for not participating in exchanges for cheaper, newer bonds at $0.30 on the dollar. The two groups differ in their amenability or reluctance to compromise, as perceived by the Argentine central government, even though cooperation and resistance go unequally unpaid.

A recent division emerged among the holdouts since the Argentine federal government is offering far more attractive settlements to hedge fund groups than to small bondholders.

Martin M. Guzman, postdoctoral research scholar at Columbia University Business School in New York City, found February an “extremely profitable” month for Argentine defaulted debt bondholders. He gave the lead, over small bondholders, to a few big holdout hedges whose in-person offers date from meetings Feb. 5, 2016, and Feb. 29, 2016.

EM Ltd. hedge fund controlled by Dart Management, and Montreux Partners LP have their shares of the $6.5 billion extended to six hedge fund groups. An offer of $4.65 billion is the settlement accepted 24 days later by the other four: Aurelius, Bracebridge Capital, Davidson Kempner and NML Capital Limited.

A settlement of $1.35 billion accepted by 50,000 Italian investors joined such smaller offers as $100 million accepted by Capital Markets Financial in February.

Offers throughout February kept to a pattern of big deals negotiated privately with a few large groups and smaller settlements offered publicly to many small bondholders.

Lawyers for the holdout group of many individual small bondholders list the variable negotiability and non-negotiability among criticisms of settlement procedures for Argentine defaulted debt bondholders. They mention that their clients are excluded from direct negotiations between representatives of the Argentine national government and of the six big holdout hedge fund groups.

Jessica J. Sleator, lawyer for one large group of individual small bondholders, notes that “We stand ready, willing and able” to negotiate blanket, low, take-it-or-leave-it offers. She observes that one 90-year-old, partly paralyzed client awaits overdue repayments, on bonds purchased at full price in the 1990s, for disability-related expenses uncovered by insurance.

Variability prompted Michael Spencer, lawyer for individual bondholders and small funds, to assert that “We haven’t been intransigent, there isn’t an impasse” and “We’re not greedy.”

Lawyers for all holdout individual bondholders and small funds question settling high with hedge funds that buy low and low with investors who pay full price.

Lawyers for exchange bondholders recommend that Argentina be allowed to pay settled claims immediately whereas lawyers for holdout bondholders and funds request 30-day extensions for everyone.

Lawyer Christopher J. Clark states that $3.1 billion in exchanged bond interest “should no longer be held hostage by other parties who want a better deal.”

United States district Court Judge Thomas P. Griesa for the Southern District of New York (Manhattan) thinks that two-hour-long arguments and rebuttals constitute “a remarkable afternoon.”

Hearings on case of Argentina's defaulted debt are being held in the Daniel Patrick Moynihan U.S. Courthouse, the United States District Court for the Southern District of New York's courthouse in Manhattan: Sheila/Wikipedia Takes Manhattan, CC BY SA 3.0, via Wikimedia Commons

Acknowledgment

My special thanks to talented artists and photographers/concerned organizations who make their fine images available on the internet.

Image credits:

The March 1, 2016, hearing brought together lawyers for two groups of investors: DealBook @dealbook via Twitter March 1, 2016, @ https://twitter.com/dealbook/status/704810415293861892

Daniel Patrick Moynihan U.S. Courthouse: Sheila/Wikipedia Takes Manhattan, CC BY SA 3.0, via Wikimedia Commons @ https://commons.wikimedia.org/wiki/File:WTM_sheila_0042.jpg

For further information:

DealBook @dealbook. 1 March 2016. "Argentina's Hedge Fund Deal Frustrates Small Bondholders." Twitter.
Available @ https://twitter.com/dealbook/status/704810415293861892

Marriner, Derdriu. 11 December 2015. "Argentine President Mauricio Macri Wins Presidential Office and Palace." Earth and Space News. Friday.
Available @ https://earth-and-space-news.blogspot.com/2015/12/argentine-president-mauricio-macri-wins.html

Marriner, Derdriu. 29 February 2016. "Holdouts Accept Argentine Defaulted Debt Settlements by Feb. 29, 2016." Earth and Space News. Monday.
Available @ https://earth-and-space-news.blogspot.com/2016/02/holdouts-accept-argentine-defaulted.html

Marriner, Derdriu. 19 February 2016. "Three Conditions to Lifting Argentine Defaulted Debt Injunction." Earth and Space News. Friday.
Available @ https://earth-and-space-news.blogspot.com/2016/02/three-conditions-to-lifting-argentine.html

Stevenson, Alexandra. 1 March 2016. “Argentina’s Hedge Fund Deal Frustrates Small Bondholders.” The New York Times > Business > DealBook.
Available @ http://www.nytimes.com/2016/03/02/business/dealbook/argentinas-hedge-fund-deal-frustrates-small-bondholders.html?

Stevenson, Alexandra; and Gilbert, Jonathan. 29 February 2016. “Argentina Reaches Deal with Hedge Funds over Debt.” The New York Times > Business > DealBook.
Available @ http://www.nytimes.com/2016/03/01/business/dealbook/argentina-reaches-deal-with-hedge-funds-over-debt.html?