ARGENTINE UPDATE – Feb 29 & Mar 1, 2016

















By Julie Wernau
2 March 2016

Representatives of hundreds of holders of defaulted Argentine debt descended on a New York courtroom on Tuesday, trying to stall a recent settlement between the country and U.S. hedge funds.

While these smaller bondholders could delay a final agreement between the Argentine government and the hedge funds, they aren’t expected to derail the deal, attorneys and analysts said.

Representatives pleaded with a New York federal court judgeto allow them more time to negotiate for payment with Argentina, which defaulted on its debt 15 years ago.

Smaller bondholders in the case — one of the longest and most litigious sovereign-debt battles in history — say they have been sidelined in the negotiation process by the large hedge funds and have asked the judge to allow 30 more days for negotiations, or pledged to appeal the judge’s decision to a higher court.

These individual investors, mostly from Argentina, are at a disadvantage in getting the country to offer a deal similar to the one it agreed on with the hedge funds on Monday. Hedge funds must be paid by April 14 or the deal is off.

Following intense negotiations, the government agreed in principle to pay $4.65 billion to Paul Singer’s Elliott Management Corp. and three other hedge funds to settle their claims on the country’s defaulted sovereign bonds, signaling a likely end to a stalemate between Argentina and 65% of its holdout bondholders following intense negotiations.

Jessica Sleater, partner at Andersen Sleater, LLC in New York, told U.S. District Court Judge Thomas Griesa the largest holder she represents is a 90-year-old man who hoped to use the bonds he bought from Argentina in the 1990s to support himself. He has had a judgment in place since 2007 and has yet to be paid, she said.

“We have received no word at all from Argentina,” she said.

The judge adjourned the hearing, pending his decision.

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By Alexandra Stevenson
2 March 2016

Argentina’s offer to pay billions to settle a dispute with a group of hedge fund investors led by the billionaire Paul E. Singer may have been a victory for both the South American nation and the hedge funds, but it has left many small bondholders out in the cold.

Lawyers for bondholders that were not included in the $4.65 billion deal Argentina made with the holdout hedge funds have argued that they will get far worse terms if they agree to a separate $6.5 billion proposal that Argentina made on Feb. 5.

Mr. Singer’s NML Capital will have made about 369 percent, or $2.4 billion, on defaulted bonds whose principal value was $617 million, according to data from the finance ministry of Argentina that was filed to the court on Monday. Bracebridge Capital, another holdout hedge fund, will be paid $1.15 billion, representing a 952 percent return on bonds with principal worth $120 million, according to the data.

On Tuesday, the Federal District Court in Manhattan heard from the lawyers of individual investors, most of whom bought Argentine bonds before the country’s colossal debt default in 2001.

One lawyer, Jessica J. Sleater, spoke of a 90-year-old client who bought Argentine bonds in the 1990s for ”patriotic” reasons and has still not been repaid. Her client, who is partly paralyzed, had planned to use money from the interest to pay for costs associated with his disability, she added.

These investors, like the big hedge funds, are known as holdout investors because they have refused to take part in two debt restructurings by Argentina after the country defaulted in 2001.

”We stand ready, willing and able” to negotiate with Argentina, Ms. Sleater said. She was referring to the fact that while Argentina has participated in several intense negotiations over the last month with lawyers and principals of six of the biggest holdout hedge funds, it has not sat down with other holdout investors. Instead, it has made a blanket offer in a take-it-or-leave-it manner that has some investors angry.

At the 11th hour of what many have called a historic deal involving Argentina and its holdout investors, it seems that those investors who were once united in their dispute against Argentina are turning against one another.

”We haven’t been intransigent, there isn’t an impasse,” said Michael Spencer, a lawyer who represents another group of individual bondholders and small funds contesting Argentina’s offer. Mr. Spencer said most of his clients bought their bonds before Argentina defaulted for full value. ”We’re not greedy,” he added as he sought to separate his clients from the holdouts that have been at times called vultures for their reputation of buying bonds up for pennies on the dollar and then seeking full repayment.

Judge Thomas P. Griesa heard from 15 lawyers representing the holdout investors big and small, Argentina, the banks, and even a group of exchange bondholders investors who agreed to take a so-called haircut during one of Argentina’s two restructurings. The exchange bondholders have not been paid since Judge Griesa ruled that Argentina cannot pay any bondholders without also paying the holdouts.

The hearing on Tuesday became messy as lawyers divided into two groups: one group that wants Argentina to be able to pay those who have settled immediately, and another group that is asking the judge to give everyone 30 more days.

Judge Griesa wants to lift the injunction that has prevented Argentina from making these payments to all bondholders after a settlement offer and the proposal it made on Feb. 5.

”We should no longer be held hostage by other parties who want a better deal,” an animated Christopher J. Clark, a representative of a group of exchange bondholders, said on Tuesday. He said his clients had been denied $3.1 billion in interest payments.

After nearly two hours of arguments and rebuttals, Judge Griesa, who has been presiding over the battle for over a decade, adjourned the hearing, deferring a decision for later.

”This has been a remarkable afternoon,” he said shortly before walking out of the court.

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By Elaine Moore
2 March 2016

Argentina is on the verge of issuing the largest sum of debt by any developing economy nation since 1996 as the country seeks to end a long-running and rancorous debt dispute using fresh borrowing.

In global financial markets, the question is what rate Buenos Aires will be forced to pay after a 15-year market hiatus and who will want to invest in a country that has been guilty of serial defaults for the past 200 years.

On Monday, Mauricio Macri, Argentine president, agreed to a $4.65bn cash payment for four “holdout” creditors who refused to restructure debt after the country’s 2001 default, including Paul Singer’s Elliott Management.

The deal, which has not yet been finalised, paves the way for resolution of a legal battle that has frozen Argentina out of international markets.

Once the total cost of the accord has been calculated, Argentine finance minister Alfonso Prat-Gay has said it will be funded through $15bn of new bonds. Further debt issuance to fund government spending is expected later in the year.

This would make Argentina the largest issuer of hard currency bonds in emerging markets since Mexico borrowed $16bn 20 years ago, according to data provider Dealogic.

With requirements this substantial, any hope the country has of borrowing money at less than 8 per cent a year may be dashed said Sergio Trigo Paz, head of emerging markets fixed income at BlackRock, the world’s largest fund manager.

“We’re very happy that Argentina has reached an agreement with bondholders,” he said. “But with such a significant amount of debt to issue it will have to look at a higher clearing price.”

One European investment house has said it will only invest if Argentina offers to pay out an expensive, double-digit yield.

Greg Saichin, managing director of emerging markets fixed income at Allianz Global Investors, said the scale of debt required meant Argentina would be wise to stagger its new bond issuance.

“Argentina has a reformist government and it is staffed by ex-Wall Street people who know what they are doing but it still hasn’t fixed up its economy,” he said. “They will expose themselves if they bring too much paper to the market in one go. I’d advise them to start with an $8bn sale.”

Debt issuance by emerging market countries has been notably light so far this year as the strengthening US dollar and dwindling global appetite for risky investment raises the cost of borrowing.

Emerging market sovereigns have issued $19bn in hard-currency bonds in 2016, down from $25bn over the same period last year as large borrowers including Russia and Turkey remain absent from markets.

Since pro-business president Mauricio Macri took office in December markets have rallied and prices for Argentina’s existing bonds have lifted out of crisis territory. Yields, which move inversely to prices, have fallen in the last year and Bonar 2024 bonds, a possible point of comparison to new 10 year debt, now yield 7.9 per cent.

However, potential investors in new Argentine debt are likely to take into account the country’s poor record when it comes to repaying obligations. Since declaring independence from Spain in 1816, the country has defaulted on its external debt eight times.

Argentina argues that the real number is seven and that the last default, which is connected to the deal the country has struck with holdout bondholders, was only technical.

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2 March 2016

A final deal between Argentina and its holdout creditors has been so long in coming that its arrival is almost hard to believe. Argentina’s government, led by President Mauricio Macri, is on the verge of completing a restructuring a decade and a half after what was then the largest sovereign default in history.

The $4.7bn settlement with holdout investors, led by the New York fund Elliott Management, will allow Argentina to return to international capital markets. Its access had been blocked by a New York judge’s ruling that prevented it paying out on alreadyrestructured bonds while it was still refusing to settle with the holdouts.

The proposed deal is an essential part of Argentina’s encouraging return to economic sanity under Mr Macri after he took over in December. But triumphalism would be misplaced. For one, the eccentric rulings of Thomas Griesa , the judge in the case, leave uncertainty hanging over future restructurings. Second, Mr Macri’s ambitious plans to stabilise Argentina’s economy are subject to serious risks.

That the creditors were persuaded to settle for 75 per cent of the bonds’ accrued value rather than holding out for 100 per cent owes something to a surprise ruling last month by Judge Griesa, who weakened their negotiating hand by signalling he would lift the injunction preventing other creditors being paid. Unusually, the judge explicitly said that Mr Macri’s election, and with it the inception of an Argentine government prepared to negotiate in good faith, was pivotal in his decision.

This only fuels suspicions that the judge’s personal exasperation with past Argentine governments played an unduly large role in his rulings. It leaves the important question of the legal precedent being set by this case in a cloud of confusion. Judge Griesa is 85 and has expressed a desire to retire soon. How much future judges will rely on their own assessment of the perceived attitude of a government in debt negotiations is anyone’s guess. Judge Griesa’s rulings have hardly helped to resolve the complicated issue of sovereign bond restructuring.

By settling with creditors, along with lifting exchange controls and restoring central bank independence, Mr Macri may have cleared the decks. But even assuming the settlement deal passes the Argentine congress, the president must still steer a course through choppy and unpredictable seas.

Mr Macri has inherited an economy in a mess , with a wide fiscal deficit and inflation around 30 per cent. He plans a fiscal tightening while at the same time expecting an economic rebound to more than 4 per cent growth next year. His government also wants to reduce inflation, despite the upwards shock to prices from the recent sharp depreciation in the peso. Expecting to achieve all this at once looks optimistic.

Moreover, both the federal government and the provinces will probably have to resort to fairly substantial debt issuance during the adjustment. Given the precarious nature of emerging market asset markets, attracting buyers at good prices for Argentine sovereign debt is not straightforward. The excellent start to Mr Macri’s presidency suggests investors will give him the benefit of the doubt, but sentiment can turn quickly.

Argentines may feel aggrieved that they have in effect been forced to pay ransom to return to the global capital markets. A combination of inept populist governance from previous administrations and arbitrary court rulings from New York have inflicted lasting damage. Mr Macri has done well to end the impasse, but it is only one stage on the country’s slow journey back to economic normality.

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1 March 2016

U.S. presidential candidates are busy boasting about the wonders to come in their hypothetical first 100 days in office. Perhaps they should look far South and consider the real-world example of new Argentine President Mauricio Macri.

This week he settled a dispute with a number of the country’s creditors that had dragged on for more than a decade as it tarnished Argentina’s reputation. Mr. Macri now has the country poised for a return to international capital markets and perhaps an economic revival that was impossible under his Peronist predecessor Kristina Kirchner.

The Macri administration agreed Sunday night to pay more than $4.6 billion to Elliott Management and other U.S. hedge funds holding Argentine bonds that had been issued prior to the country’s 2001 default. While many of the country’s bondholders had accepted government offers of roughly 30 cents on the dollar after the default, Elliott and the other holdouts maintained that under the law and their bond contracts they were entitled to be paid in full.

Ms. Kirchner’s refusal to negotiate with what she called “vulture” investors punished her own country far more than it did the investors. Mr. Macri understands this and has aimed to resolve the issue.

By agreeing to pay roughly 75% of what Elliott and other funds say they were owed, the new President has resolved the claims on about 85% of the bonds owned by holdout creditors. Assuming his negotiators are able to resolve the remaining claims, Mr. Macri seems well on his way to persuading a U.S. federal judge to lift injunctions that have effectively prevented Argentina from borrowing in U.S. bond markets. Now President Macri must persuade Argentine legislators to approve the deal as well.

In December we noted that Mr. Macri spent his first week in office ending capital controls and moving toward a stable peso. This week’s action suggests that the rule of law is returning to Argentina.

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March 1, 2016

BUENOS AIRES, Argentina — Argentine President Mauricio Macri painted a grim picture of the nation on Tuesday, telling Congress that the state is broke, drug traffickers are prospering and institutions including the armed forces are so weakened that the borders are barely protected and many military planes cannot fly.

Addressing Congress on the first day of the legislative session, Macri also blasted the previous administration, saying that political patronage had led to a major spike in the number of workers on government payrolls. Several thousand people have been fired since Macri assumed office in December.

“We are a great country with enormous potential,” Macri said, sitting next to Vice President Gabriela Michetti as he addressed Congress. “But the first thing we must do is recognize that we are not in good shape.”

Macri, a conservative and former mayor of Buenos Aires, campaigned on promises to modernize the economy by attracting foreign investment, root out corruption and solve a long-standing spat with creditors in the U.S.

Speaking in a somber tone during the hour-long speech, several times Macri returned to the issue of drugs. He said Argentina was a “prosperous country for drug traffickers,” and added that the South American nation had become the world’s third largest producer of cocaine.

The problem was exacerbated by “borders that are virtually defenseless” and a military so weakened that it possessed “planes that don’t fly.”

Macri addressed the long-standing fight with a group of creditors in the U.S., bluntly framing it as a problem now in the hands of Congress. On Monday, Argentina and the group of creditors led by billionaire investor Paul Singer announced a tentative deal, potentially putting an end to years of legal fights that have kept the South American nation from accessing international credit markets.

The deal, however, must be approved by Congress, where Macri doesn’t have majorities in either chamber and will likely face stiff opposition from some sectors of the Peronist Party, which lost the presidency for the first time in 12 years in last year’s election.

Macri said he trusted legislators would “be responsible” in their rhetoric and “we’ll build the necessary consensus” to pass a deal.

Former President Cristina Fernandez refused to negotiate with the group of creditors she called “vultures,” even after New York federal court Judge Thomas Griesa repeatedly ruled against Argentina.

Macri said the decision not to engage had cost Argentina dearly. He said the total hanging debt went from about $3 billion in the beginning to about $11 billion, and that the inability to access international credit markets had cost Argentina $100 billion and millions of jobs. He did not explain how he came to those numbers, but the implicit message to Congress was clear: don’t mess this up.

Roberto Bacman, director of the Center for Public Opinion Studies, a South American research firm, said Macri will likely get the votes he needs to pass the deal with the holdouts, but that will mean negotiating on other things, like supreme court nominations.

“Votes are never free,” said Bacman, adding that the biggest threat to Macri’s ability to govern was the high inflation. Last year, it was estimated around 30 percent. After a sharp devaluation of the peso in December, prices have continued to soar.

Macri commented on the inflation, and said that the solution was to get the economy growing again after four years of virtual stagnation in its gross domestic product. He said the process would take time, and blamed the previous administration for “700 percent inflation in the last 10 years.”

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By Josh Kosman
1 March 2016

Paul Singer and Argentina on Monday announced a settlement in their epic war.

“It gives me greatest pleasure to announce that the 15-year pitched battle between the Republic of Argentina and Elliott Management, led by Paul Singer, is now well on its way to being resolved,” Daniel Pollack, the New York court-appointed mediator in Argentina’s bondholder litigation, said.

By resolving most of its bondholder suits, Argentina – under newly elected President Mauricio Macri – will be able to again access the global debt markets.

Meanwhile, the deal to pay Singer’s firm roughly 75 cents on the dollar for government bonds Singer acquired in 2001 for 25 cents gives Singer a nice payout, over a much longer time frame.

“They got a very good settlement,” a source said, explaining why Singer changed course.

Based on rough calculations, Singer’s Elliott will make an annual 15 percent return on its $300 million investment over 15 years – clearing almost a $1 billion profit.

Still, it was quite a turn for Singer, who had been demanding to be paid in full and, as recently as 2013, impounded an Argentinian naval training ship in Ghana as a means of demanding repayment.

The dispute was between Argentina and bondholders who never accepted a 25- cents-on-the dollar exchange made in 2001 for $93 billion in defaulted debt.

Macri, who took office in December, reopened negotiations and, with the help of New York Judge Thomas Griesa, pushed talks along.

On Feb. 19, Judge Griesa ruled he would allow Argentina to reenter the capital markets to help its people because it had shown a willingness to make a credible offer.

That left Singer with “a choice about being right or just getting paid,” an Argentina debt holder told The Post.

He is taking the money.

Bondholders had until the end of Monday to join the settlement or risk being left behind. The settlement is contingent on Argentina’s Parliament approval.

Former Argentina President Cristina Fernandez de Kirchner instead took a very tough approach with bondholders, and never offered close to 75 cents on the dollar.

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By Daniel Politi in Buenos Aires
March 1, 2016

Argentina’s president urged the opposition-led congress to approve a deal to pay holdout creditors that could end the country’s long banishment from international capital markets.

“It is now up to congress to determine whether we finish with this conflict that has been going on 15 years,” Mauricio Macri said at the opening of the new congressional year on Tuesday. “I trust the reality will take priority over the rhetoric.”

The president begins a domestic political battle to implement a $4.653bn preliminary agreement to pay the top holdout creditors, led by Paul Singer’s Elliott Management, that had refused to restructure debt from the country’s 2001 default. The long legal battle with the holdouts pushed Argentina into a technical default in 2014 after New York judge Thomas Griesa said the country was forbidden from servicing its restructured debt abroad. Preliminary agreements have been reached with holdouts who have 85 per cent of the total monetary claims against Argentina in US courts. Discussions are to continue with the remaining holdouts.

In order for Mr Griesa to lift the financial blockade against Argentina, the congress must first approve the agreements with the holdouts and lift two laws — the Lock Law and Sovereign Payment Law — that effectively block the country from paying creditors who had refused the 2005 and 2010 restructurings.

“Failing to resolve this conflict was expensive for Argentina and benefited the bondholders,” Mr Macri said. “The lack of access to credit cost Argentina $100bn and more than 2m jobs that were never created.”

Mr Macri’s electoral alliance, known as Let’s Change, has only around 35 per cent of seats in the lower house of congress, although allies and a recent split in the bloc aligned with the former administration make approval of the deal likely.

Support, however, will not come without opposition. The staunchest allies of former president Cristina Fernández de Kirchner have already made clear they will not greenlight the deal.
Former economy minister Axel Kicillof, now an opposition lawmaker, described the deal as an “unacceptable extortion”. Andres Larroque, a lawmaker who leads the Kirchnerite youth group La Campora, called Mr Macri “the hero of the vulture funds”.

The president faces a bigger challenge in the senate, where his alliance only has 15 of 72 seats and allies of the previous administration hold a clear advantage.

The government and its allies do not have a lot of time to convince the opposition. Cash payments must be finalised by April 14, although the parties could agree to extend the deadline.

The government will present a bill to congress this week with discussions expected to begin in committee on Thursday.

“For the first time in 15 years we can say that Argentina is starting to definitively leave the default,” finance minister Alfonso Prat-Gay said at a news conference on Monday night.

To secure support, the government will have to rely on any pressure that can be exerted by governors, many of whom are also eager to see the conflict with holdouts end to clear the path to issue debt.

Vice-president Gabriela Michetti suggested the provinces will play a key role in obtaining the necessary votes to seal the deal with holdouts.

“We will have the necessary numbers because otherwise the provinces will face an enormous difficulty to finance their own deficits,” Ms Michetti said after the speech.

Argentina hopes to issue two or three new sovereign bonds in international markets for up to $15bn to finance the agreements with bondholders, which must be paid in cash. That is expected to be the first in a string of issuances.

The national governments, provincial governments and local companies are expected to issue debt worth $25bn-$30bn this year, according to estimates by Alejo Costa, chief of research at Puente, a local brokerage. Out of that total, the national government is expected to issue around $20bn and provincial governments an additional $3bn.

“At a corporate level, things are unlikely to start picking up until 2017,” Mr Costa said.

The US Treasury Department celebrated the imminent return of Argentina to the global markets.

“Resolution of this longstanding dispute is a positive development for the entire global financial system,” a Treasury spokesperson said late Monday. “We look forward to full implementation of the agreement, which should help Argentina return to the international capital markets and promote strong and sustainable growth.”

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By Hugh Bronstein and Maximilian Heath
March 1, 2016

Argentine President Mauricio Macri on Tuesday urged Congress to approve a landmark deal reached with creditors over defaulted debt, in order to comply with a U.S. court deadline and permit access to the financing needed to jumpstart Latin America’s third largest economy.

Macri, less than three months in office, is likely to cobble together the votes needed to implement the deal announced on Monday to pay $4.65 billion “holdout” hedge funds that rejected steep cuts in repayment terms offered in the country’s 2005 and 2010 bond restructurings.

The question is whether Congress will pass the deal before an April 14 deadline set by the U.S. court hearing the case.

Adding to the urgency, the local peso is plumbing record lows, 30-percent inflation is squeezing consumers, and Macri’s approval ratings have taken a hit as he cuts the public payroll.

“We have been in default since 2002,” Macri said. “I am counting on this Congress to end this conflict, which has lasted 15 years. I am sure you will meet this responsibility.”

As he spoke, the local currency hit an all-time low of 16 to the U.S. dollar. Macri’s address to both houses of Congress was interrupted by applause from allies and heckling from foes.

Some held up signs saying “Destruction of the State”, in reference to recent public sector job cuts, and “Don’t Mortgage the Future”. The opposition is against Argentina’s return to the global bond market, fearing a steep increase in indebtedness.

The country must settle the court case in order to launch Macri’s economic recovery program. Elected in November on a free markets platform, he has lifted many of the controls that previous President Cristina Fernandez had put on the economy.

Miguel Angel Pichetto, a leader of moderate Peronists in the Senate, said earlier that the proposed deal with holdouts will not go to an immediate vote.

“The bill has to be studied carefully,” he said, adding that he is likely to vote in favor.

Provincial governors, desperate for money needed to restore crumbling roads, are lobbying the Senate in favor of the deal.

But Senator Maria de los Angeles Sacnun, a staunch Fernandez ally, called the deal “an intrusion of our sovereignty.”

The U.S. judge hearing the creditors’ case said last month that he wants Congress to repeal the law banning the government from offering better terms than those included in Argentina’s 2005 and 2010 debt restructurings. The holdouts rejected those restructurings and sued for full repayment in the U.S. courts.

The government wants to issue two or three new sovereign bonds on international markets for a total of up to $15 billion in April if lawmakers are swift in backing the accord.

Analysts and administration officials say he can get the support he needs in the lower house of Congress, where his coalition has the biggest minority and no party has a majority. Fernandez’s allies will nonetheless put up a fight.

“Now the extortion has been put before Congress,” house member Axel Kicillof, who served as Fernandez’s economy minister, wrote in an editorial.

(Reporting by Hugh Bronstein Editing by W Simon and Clive McKeef)

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Mar 1st 2016
The agreement is a victory for the country’s new president

FOR more than 14 years Elliott Management, the hedge fund led by Paul Singer, was the pantomime villain in Argentina’s dispute with its bondholders. Rather than accepting a big write-down, as other creditors did during restructurings in 2005 and 2010, Elliott, along with several other “holdout” creditors, pursued full payment through the New York courts. That led to a default by Argentina in 2014.

Now the drama is entering its final act. On February 29th Daniel Pollack, the court-appointed mediator, announced that Argentina had reached an agreement in principle with four of the largest creditors, led by Elliott. Argentina’s payment of $4.65 billion will be 25% less than they were claiming. With this agreement, Argentina has settled with creditors who hold 85% of the disputed debt.

It is a coup for Mauricio Macri, Argentina’s recently elected president, and will end the country’s long isolation from the international credit markets. Together with other steps Mr Macri has taken since assuming office in December, including ending exchange controls and removing taxes on exports, the credit deal helps restore normality to an economy that had been distorted by populist controls during 12 years of rule by his two Peronist predecessors, Cristina Fernández de Kirchner and her late husband, Néstor Kirchner.

Argentina’s negotiators paved the way by reaching deals with smaller groups of holdouts. On February 2nd Argentina agreed to pay a group of Italian bondholders $1.35 billion; on February 5th it settled for $1.1 billion with two of the six largest holdouts, Montreux Partners and EM Ltd. But Mr Singer’s Elliott Management led the most intransigent group; an agreement with them is the real prize.

Thomas Griesa, the judge overseeing the case, had contributed greatly to Argentina’s predicament in 2012 when he ruled that the country could not pay bondholders who had agreed to a restructuring, or issue new debt, unless it settled with the holdouts. That precipitated Argentina’s default. On February 19th this year the judge in effect switched sides, saying that Mr Macri’s election had “changed everything”. He said he would lift the injunction barring Argentina from paying other creditors from March 1st under certain conditions. That was a severe blow to the holdouts, who had used the injunction as leverage to press Argentina for full payment. “The message to non-settling plaintiffs, many of whom have had no opportunity to negotiate with anyone, is unmistakable: settle by February 29th, or else,” wrote their lawyers.

The deal is not quite sealed. Before the injunction is lifted Argentina must repeal two laws that block agreements with the holdouts. The “Ley Cerrojo” (Lock Law), enacted in 2005 during the first round of debt restructuring, was intended to prevent Argentina from offering holdouts a better deal than that accepted by holders of restructured bonds. The “Ley de Pago Soberano” (Sovereign Payment Law) of 2014 was a failed attempt to circumvent Mr Griesa’s injunction by re-routing payments to exchange bondholders through Argentina or France.

The government is confident that it can secure the votes it needs to repeal the laws when Congress resumes on March 1st. In early February, 18 deputies from the Front for Victory (FPV), Ms Fernández’s party, broke away to form their own, more moderate, “Justicialist Bloc”. The move deprived the FPV of its position as the largest party in the lower house. The defectors have said they are willing to work with the new government to repeal the laws. In the upper house the government plans to enlist the support of Peronist governors, who are also keen to tap international credit markets. They are likely to persuade the senators over whom they have influence to support the repeal of the legislation.

Once the laws have been scrapped, the government hopes to raise up to $15 billion through a bond issue which it will use to pay the creditors. Some analysts doubt that the market can absorb such a large bond issue in one go. But Argentina’s finance ministry is bullish. “All the banks we’ve spoken with are confident that we can raise the money we need in the market,” said Luis Caputo, the finance secretary. “We’re optimistic.”

The government then plans to return to the market in an effort to finance its budget deficit, which was a massive 5.8% of GDP last year. Under Ms Fernández’s administration the central bank financed the budget deficit by printing money, pushing up inflation. The bond issue will help the central bank to end that harmful practice, but the relief from high inflation will not come immediately. Propelled by the devaluation of the peso, the annual inflation rate has risen to around 30%; the government had hoped inflation this year would be 20-25%. It is trying to persuade trade unions not to demand excessive wage rises, which would drive inflation even higher. The unions are taking a hard line, however. On February 26th teachers extracted an agreement from the government for a 32% salary increase; other unions will demand a pay rise at least as big.

Mr Macri has so far taken a cautious approach to bringing down the budget deficit. Energy subsidies have been cut, but the president is reluctant to slash other spending, which would further antagonise Argentines already angry about inflation and, he fears, weaken growth and employment. But until the government brings the deficit substantially down, the central bank will struggle to regain credibility. A return to the bond markets is not enough.
Nevertheless, the debt deal should boost the government’s confidence. Argentina has until April 14th to repeal the legislation and pay Elliott and its fellow litigators in full. It must also settle with the holders of the remaining 15% of the debt. But for now the exhausted negotiators are allowing themselves a moment of congratulation. “It seemed like a thousand years to me”, Mr Pollack said of the seemingly interminable negotiations. Mr Macri hopes not to take up much more of his time.

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By David Dayen
March 1, 2016

Argentina’s long march back to international debt markets may finally have reached its end. Late Sunday night, the government and “vulture” hedge fund creditors struck a deal that would allow the South American nation to borrow once again for the first time in nearly 15 years. The longest debt holdout in recent memory reinforces the ethos of the vulture fund: Use maximum leverage for maximum return on a cheap investment in a troubled country. Paul Singer and his hedge fund pals have played this so well that they’re even making their enormous payday look like a loss.

The home of tango and 32-ounce grass-fed steaks decided to default on $132 billion in debt after an economic crisis in 2001, closing off access to credit markets. Unexpectedly to purveyors of the neoliberal consensus, growth followed under President Nestor Kirchner amid a commodity price boom. Cleaning up the aftermath, Argentina engaged in two debt restructurings in 2005 and 2010. Roughly 93 percent of all bondholders participated in these exchanges, which entitled them to 30 percent of face value of the debt.

But holdouts saw an opportunity. NML Capital’s Singer, his former protégé Mark Brodsky of Aurelius Capital, and a handful of other hedge funds scooped up Argentine debt at fire-sale prices and refused to settle. Years of hardball wrangling, which included Singer trying to commandeer an Argentine naval ship in Ghana as partial repayment, culminated with the vulture funds using U.S. courts to force Argentina’s hand.

The Argentine bonds, which were governed by New York law, had to be repaid pari passu, or with equal treatment. Judge Thomas Griesa ruled that Argentina could not repay the 93 percent of exchange bondholders who took the deal unless they also paid out the 7 percent who did not. But paying the holdouts in full would trigger a “Rights Upon Future Offers” (RUFO) clause, and compel full reimbursement to every bondholder, nullifying the debt restructuring and putting Argentina back in the hole by $100 billion.

So Argentine leaders played their only card: They refused to follow the U.S. court order, instead not paying anyone after August 2014, their second default in 13 years. This immiserated the Argentine economy, harmed the exchange bondholders who accepted the reduced terms, and exposed the inability of U.S. courts to sanction sovereign nations.

The only relief for this standoff was an election. Mauricio Macri, the right-leaning mayor of Buenos Aires running against the Kirchner-dominated movement that ruled Argentina for a decade, won the presidency last December, on a vow to impose business-friendly policies and end the creditor standoff. Because the RUFO clause expired in 2015, Macri could negotiate with the holdouts without having to apply their deal to other bondholders. Judge Griesa helped negotiations along by dropping the injunction on paying all creditors who accepted the earlier deals.

Without further leverage, Singer and company settled. But the deal is quite lucrative: $4.65 billion for four hedge funds (NML, Aurelius, Davidson Kempner, and Bracebridge Capital), including about 75 percent of the $5.9 billion in principal and interest owed, plus legal fees and a special payment for claims outside the New York-law jurisdiction.

Singer, who personally participated in the negotiations for weeks, tried to downplay the deal, calling Argentina’s negotiator “tough but fair” and that “a settlement is, by definition, a compromise.” But weep not for the vultures. First of all, a 25 percent haircut is far better than the 70 percent haircut accepted by bondholders in the 2005 and 2010 debt exchanges. Second, Singer paid $48.7 million for his bonds, which had an $832 million face value, according to Forbes. A 25 percent haircut leaves him with $624 million, or a 1281 percent return on investment.

But it could be far more than that, as the interest on some of the bonds accrued at the level during the Argentine default, which was 101 percent per year. This arguably explains why Singer held out for a decade; 101 percent interest can add up quickly. When you add in all the interest, the final judgments that Singer owns reportedly total $1.7 billion. Even a 75 percent haircut on that would be an astronomical payday.

It’s hard to get exact figures on just how much Singer and company paid for the bonds, and how much they will extract from Argentina; hedge fund exemptions from disclosure requirements inhibits a full accounting. And some of these bonds were purchased as far back as 2002, so the long wait should be factored into calculations of annualized returns. Still, whatever the precise math, the fact is that, while Singer goes around moaning about a compromise, he is being rewarded handsomely merely for having the insight to buy up the bonds of a country in trouble and the determination to remain as stone-faced as possible while waiting for a big return.

The Argentine government is certainly happy to crawl out from under the rock of default, and to unlock international credit markets to refresh depleted foreign reserves. A fresh infusion of capital will help with a treacherous inflation situation, and stabilize the country’s economy.

Of course, the first set of borrowing will go directly to paying off the holdouts, not Argentine public services or investment. That the holdouts succeeded this much, with the help of the U.S. judiciary no less, always represented to me a kind of punishment for Argentina rejecting the IMF-led consensus. They defied the world and lived to tell about it. The holdouts gave the international community a chance to punish the country for its intransigence, and only let them out of the vice grip when they elected a pro-business president.

Meanwhile, the precedent for this working out so well for the vulture funds is terrifying. A principle has been firmly established, that you can go around looking for sick countries and corporations and use all necessary means to use their pain for profit. It can be applied to Puerto Rico, where another similar tragedy is playing out. The ability to renegotiate debt, a standard tool in practically all borrowing relationships, will be hurt by the example of stubbornness winning out.

In a deal struck Sunday, hedge funds led by billionaire investor Paul Singer have managed to squeeze billions out of a struggling economy.

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By Shannon K. O’Neil
March 1, 2016

During his first two months in office Argentine President Macri pushed through reforms to eliminate currency controls, cut export taxes and remove energy subsidies. He also appointed two new judges to the Supreme Court and enhanced the court’s oversight of security surveillance, postponed promised changes to the legal system, shuffled responsibilities within the cabinet, modified a contentious media law and annulled a Kirchner decree transferring federal funds to the provinces. All was done without Congress, which entered its three-month summer recess on November 30 (before Macri’s inauguration). This will change March 1, as the legislature comes back into session.

The most immediate executive-legislative negotiation will involve the Cerrojo and Pago Soberano laws, both of which prevent Argentina from settling with holdout creditors. Last week U.S. District Court Judge Griesa agreed to lift the injunction preventing Argentina from making bond payments so long as these laws are repealed and those who settle by February 29 are paid.

Another big issue will be coparticipaciones, or federal transfers to the provinces. Before stepping down Cristina Kirchner changed the rules, ordering the transfer of a previously withheld 15 percent of tax intakes back to the provinces (which Macri quickly cancelled). The administration is now negotiating a permanent end to these transfers by 2021 in return for forgiving provincial debt.

Other issues include confirming the two Supreme Court justices he installed on the bench, creating a new media regulator, Enacom, and liberalizing the broadcasting industry.

Though Macri’s own party holds only 42 of the 257 seats in the Chamber of Deputies, with his electoral coalition partners UCR and CC and the support of Sergio Massa’s UNA (a dissident Peronist and the second runner up in October’s presidential election), he holds the largest plurality and a near majority. Splintering within the former Kirchner FPV coalition bring another dozen congressional votes into play. His administration will benefit too from the difficult financial situation of so many provinces. Governors, and by extension many senators and representatives, are likely to support the administration in its legislative agenda as they look for federal funds and permission to emit debt to cover mounting current obligations.

More worrisome for Macri’s reform agenda are the just begun annual labor negotiations. The unions are demanding 40 percent wage hikes; the government hopes to keep increases below 25 percent. Private consultants and local Buenos Aires measures suggest inflation is at 30 percent—outstripping the government’s announced expectations of 20-25 percent (the INDEC statistic agency is being revamped to meet international technical standards, so no official national numbers exist). Macri’s team already lost a first round to the teachers union, granting them a 40 percent raise. Many governors are now refusing to recognize the agreement and up teacher pay given their financial straits. Labor unrest, particularly if it leads to violence, could dent the president’s popularity, down 10 percent since his start in December. Yet granting bigger wage hikes threatens to spur inflation, increase fiscal deficits (already at 7 percent of GDP in 2015), and derail Macri’s broader economic reform agenda.

Shannon K. O’Neil is the Nelson and David Rockefeller Senior Fellow and Director, Civil Society, Markets, and Democracy Program at the Council on Foreign Relations.

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March 1, 2016

BUENOS AIRES, Argentina (AP) — An Argentine judge overseeing the investigation into the mysterious death of prosecutor Alberto Nisman on Tuesday declared herself “unfit” to try the case, the state news agency Telam reported.

The move by lower court Judge Fabiana Palmaghini effectively pushes the case to federal court. Her decision comes a day after she heard testimony by the South American nation’s most famous spymaster, Antonio Stiuso, about his relationship with Nisman who died while investigating Argentina’s worst terrorist attack.

Stiuso had assisted Nisman’s investigation of the unsolved 1994 bombing of a Buenos Aires Jewish center before he was found shot dead in his apartment on Jan. 18, 2015. Days before his death, Nisman accused then-President Cristina Fernandez of helping Iranian officials cover up Iran’s alleged role in the bombing that killed 85 people. The case against Fernandez was later thrown out.

At the time, Fernandez suggested Nisman was killed by rogue intelligence agents, though she gave no evidence. She also said that Stiuso fed false information to Nisman and even had a hand in writing the late prosecutor’s report detailing the accusations against her.

Palmaghini had previously said that there was not enough evidence to determine that the prosecutor was slain. She also had rejected a request to move the case to a federal court, prompting Nisman’s family to appeal.

The details that caused her to change her mind have not been released. Telam only said on Tuesday that Palmaghini will send Nisman’s file to federal courts in Buenos Aires where a new judge will be picked to handle the unsolved case that has rocked Argentina.

Stiuso oversaw a widespread wire-tapping operation before he was removed as head of Argentina’s spy agency in December 2014.

The evidence shows that Nisman tried to contact Stiuso four times by telephone the day before he was found shot dead. But Stiuso said in a statement to a prosecutor last year that he never heard the calls and he fled Argentina complaining of threats on his life. He had failed to comply with a summons ordering him to testify until this week.

His closed-door testimony came just days after a top Argentine prosecutor told the country’s criminal court of appeals that the case should be handled by a federal court and that he believes Nisman was killed and didn’t take his own life, marking the first time that a judicial official has called Nisman’s death a homicide.

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1 March 2016

NEW YORK, March 1 (Reuters) – A group of Argentine bondholders who reached a $4.65 billion settlement resolving litigation over defaulted bonds urged a U.S. judge on Tuesday to wait longer before lifting injunctions that restrict the country from paying off some debts.

Hedge funds including Elliott Management’s NML Capital asked U.S. District Judge Thomas Griesa in Manhattan to wait 30 days to formally order the injunctions vacated, to allow the remaining plaintiffs to reach settlements.

Theodore Olson, NML’s lawyer, said that firm and three other hedge funds that agreed to Monday’s settlement considered it a “monumental achievement” that would resolve the bulk of the decade-plus litigation.

He said the deal could fall apart if the remaining plaintiffs, holding 15 percent of the claims in the litigation, are not given a chance to also settle, as they likely would appeal a decision lifting the injunctions.

“The agreement is just on the edge of being successful,” Olson said.

Michael Paskin, Argentina’s lawyer, countered that no delay was needed, and Argentina deserved certainty so that it could raise money in capital markets to fund the settlements.

“It is fully invested in the opportunity your honor has presented to resolve this litigation once and for all,” Paskin said.

The arguments stemmed from an order by Griesa on Feb. 19 indicating that, at Argentina’s request, he planned to order the injunctions vacated, provided the country repeals two laws concerning its debts and pays creditors who by Monday had reached settlements.

That order came after Argentina offered on Feb. 5 to pay $6.5 billion to settle lawsuits by various bondholders stemming from its record $100 billion default in 2002.

Argentina says $6.2 billion in deals have been reached with creditors who spurned its 2005 and 2010 debt restructurings, which resulted in 92 percent of its defaulted debt being swapped and investors being paid less than 30 cents on the dollar.


Tuesday, March 2nd














14. IT’S BEEN EMOTIONAL (Financial Times (FT.Com))


By Daniel Politi in Buenos Aires and Pan Kwan Yuk in New York
1 March 2016

Argentina is poised to return to international capital markets after a 15-year ban as it finally reached agreement with a group of creditors led by Paul Singer’s Elliott Management .

The deal, which needs approval by Argentine lawmakers, is to pay $4.653bn to settle all claims with four “holdouts” that refused to restructure debt after the country’s 2001 default.

During the 15-year legal battle creditors have attempted to embargo everything from navy frigates to satellite launches to claw back the money a New York court said they were owed from defaulted bonds.

Argentina suffered a second technical default in 2014 after New York judge Thomas Griesa said it was forbidden from servicing its restructured debt abroad without paying the holdout creditors first.

The agreement is a victory for Mauricio Macri , the Argentine president, who took office on December 10, after he made ending the legal battle against holdout funds one of his campaign promises.

Elliott welcomed the agreement. “We are hopeful the completed negotiations . . . have cleared the way for other plaintiffs to reach satisfactory resolutions as well,” it said.

To lift the financial blockade on Argentina, the country’s congress must approve the deal and lift two laws that prevent the country from paying creditors who had rejected the 2005 and 2010 restructurings. Analysts and allies of Mr Macri are optimistic that they have the necessary votes to pass the measures once Congress resumes today.

Decision after decision had gone against Argentina but the judicial tables began to turn in favour of the country last month when the new government offered to pay about $6.5bn in cash to the holdouts for claims of $9bn.

“Put simply, President Macri’s election changed everything,” wrote Judge Griesa on February 19 after he agreed in principle to lift the injunction.

Cristina Fernández de Kirchner, Mr Macri’s predecessor, had refused to negotiate with the holdouts, frequently referring to them as “vultures”.

The deal with the four biggest creditors means that agreements in principle have been reached with bondholders who hold more than 85 per cent of the claims against Argentina that have favourable rulings in US courts, according to mediator Daniel Pollack.

Alfonso Prat-Gay, the Argentine finance minister, has said the country plans to issue $15bn in debt to fund the payments without dipping into reserves. As part of the agreement, the holdouts agree not to try to interfere with that issuance, Mr Pollack said. That is expected to be the first of several issuances by Argentina, provinces and private companies.

“This is the equivalent of a giant albatross being lifted from Argentina’s neck and comes just in the nick of time,” said Brett Diment, head of emerging market debt at Aberdeen Asset Management.

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By Julie Wernau and Taos Turner
1 March 2016

Argentina has reached a preliminary agreement to end one of the longest and most contentious battles over government debt in history, potentially handing a big payday to hedge funds that held out for a decade and a half.

The government agreed in principle on Sunday to pay $4.65 billion to Paul Singer’s Elliott Management Corp. and three other hedge funds to settle their claims on the country’s defaulted sovereign bonds, according to Daniel Pollack, a mediator charged by a U.S. judge with overseeing settlement of the dispute.

The agreement still has to clear a number of hurdles, including winning approval of the Argentine congress and heading off legal challenges from any creditors who don’t cut a deal. But if completed as envisioned, it would pay about 75% of what the hedge funds have said Argentina is obliged to pay, several times more than they actually invested in the debt.

Torino Capital, a New York-based investment bank, said the hedge funds will likely reap between 10 to 15 times what they initially paid for the bonds. That figure, which is based on the assumption that they bought the debt at about 20 cents on the dollar, is in line with other analysts’ estimates. The settlement includes accrued interest and lawyers fees.

A deal also would be a victory for Argentina’s new president, Mauricio Macri, who made settling the dispute among his priorities during the campaign. He wants a deal so Argentina can raise new capital from foreign bond offerings to help stimulate its depressed economy.

The ruling party has only a small number of legislators, and Mr. Macri will have to reach across party lines to get the votes he needs, analysts said. Still, pollsters said that after 15 years of stalemate, public opinion is coalescing around a deal.

“More than 60% of the Argentine people think a settlement will be very beneficial to the Argentine economy,” Alejandro Catterberg, director of polling firm Poliarquia Consultores, said on Monday.

Karina Sapini, a 24-year-old hairdresser, said Argentina needs to pay its debts and backed a deal with bondholders. “It’s like at my business,” she said. “If I don’t pay for my shampoo and conditioning products, my providers will stop selling them to me.”

Argentina stopped payment on more than $80 billion of debt in 2001, the largest government default at the time. An overwhelming majority of bondholders, 93% in all, settled for 30 cents on the dollar, leaving the remainder of holdouts to battle for more.

The new willingness to settle represents a sea change for the government and for Argentine citizens battered by years of economic weakness. Argentina’s previous administration had taken a hard-line stance with the hedge funds, calling them “financial terrorists” and vowing not to give in to their payment demands.

“We are pleased to have reached an agreement with Argentina,” a spokesman for Elliott Management said. Elliott and other bondholders have declined to comment on their profits or when they acquired the defaulted debt.

On Monday, some legislators already were criticizing the deal. “This is a barbarity,” said Congressman Claudio Lozano, calling on the government’s auditing agency to study the agreement. “We want all the information about this before voting on it.”

The dispute was dubbed the “trial of the century” by analysts, who said a successful settlement will set important precedents. The outcome upends the conventional wisdom that bondholders have little recourse if a government defaults on its debt. The pact raises the likelihood that a minority of bondholders could be successful in the future in isolating a government from broader credit markets to force payment.

The lengthy battle was possible, because the bonds were sold to investors without collective action clauses, which would have forced minority holders to go along with a settlement if the bulk of the creditors agreed.

Argentina isn’t an isolated case in that regard. Countries have issued about $900 billion in bonds in foreign currencies and governed by a foreign country’s laws. About 20% of those bonds don’t include collective-action clauses, according to the International Monetary Fund.

Hedge funds and legal specialists are now watching Venezuela,where President Nicolas Maduro’s administration coulddefault on bonds sold by the government or state-owned oil company Petroleos de Venezuela SA, or PdVSA. Some of Venezuela’s bonds allow a minority of bondholders to hold out against a large majority.

Argentina’s ability to hold off payment ran out, as years of isolation from capital markets drained its reserves and left its economy in shambles. Amid 30% inflation, a large fiscal deficit, stagnant economic growth and declining reserves, Argentines ousted the country’s long-ruling populist government in December and installed Mr. Macri.

The new government’s policies have made the country’s markets one of the most popular bets among investors. Argentina’s Merval index has gained 12% this year at a time when most of the world’s stocks are falling.

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By Alexandra Stevenson and Jonathan Gilbert
1 March 2016

Argentina has agreed to pay $4.65 billion to four hedge funds in a deal that could put an end to more than a decade of mudslinging and legal attacks that had cut the country off from global financial markets.

The agreement, announced on Monday, opens the door for Argentina to attract foreign investment needed to revive its stalling economy.

”This is the equivalent of a giant albatross being lifted from Argentina’s neck,” said Brett Diment, the head of emerging market debt at Aberdeen Asset Management. ”The litigation and lack of access to international capital has had a sclerotic effect on the country for years but it was facing a real financial squeeze this year,” he said.

The four hedge funds, which include the billionaire Paul E. Singer’s NML Capital, were the last major hedge fund investors among a group that declared legal war on Argentina in the United States courts 12 years ago.

These holdouts, so named for their refusal to participate in Argentina’s two restructurings after the country defaulted on $100 billion of debt in 2001, sought billions in bond repayments and eventually succeeded in preventing Argentina from paying any of its creditors.

And they went to great lengths to compel Argentina to pay — at one point persuading authorities in Ghana to seize an Argentine navy ship as collateral, with a crew of about 300 on board. They also moved to impound other government assets, including a satellite.

Their ultimate victory illustrates the outsize influence hedge funds can have in the countries where they bet their money. And their legal tactics are likely to be used again by other investors contesting the debt obligations of sovereign powers.

The four holdout firms, including Aurelius, a hedge fund run by Mark Brodsky, a former trader at Mr. Singer’s Elliott Management; Davidson Kempner; and Bracebridge Capital, have agreed not to try to prevent Argentina from raising new money, which it will need to do in order to pay the settlements it has made.

The deal will also depend on whether Argentina’s legislature will repeal domestic laws that prevent the government from paying holdouts. The parties agreed on a deadline of April 14 to pay the settlement.

The settlement will be extremely profitable for the hedge funds. Martin M. Guzman, a postdoctoral research scholar at Columbia Business School, has estimated that NML paid $48 million for some bonds it bought in 2008 and with the deal it will receive approximately $620 million for those bonds — an annual return of about 38 percent over eight years.

For Mr. Singer, who has supported Republican candidates and gay marriage, principle was as important, if not more, than profit, in pursuing a nearly 15-year fight.

”By being a country that scoffs at the rule of law, they sacrifice so much,” Mr. Singer said in a recent interview. NML’s investments in Argentine debt and other sovereign debt represented less than 2 percent of the $26 billion in assets that his hedge fund company, Elliott Management, manages over all, he noted.

A spokesman for Elliott said on Monday that the firm was ”pleased to have reached an agreement.”

Pressure had been growing on the holdouts to settle with Argentina after its newly elected president, Mauricio Macri, moved quickly to settle with other bondholders. His government struck a $1.35 billion settlement with a group of Italian investors and offered to pay $6.5 billion to the group of six hedge fund holdouts in February. Two of those firms, Montreux Partners and Dart Management, accepted the proposal.

On Feb. 19, Judge Thomas P. Griesa of the Federal District Court in Manhattan, who has presided over the lengthy legal battle, dealt the holdouts a setback by agreeing to lift an injunction that has prevented Argentina from raising new money in bond markets or paying its creditors.

”This is a giant step forward in this long-running litigation,” Daniel A. Pollack, the court-appointed mediator, said on Monday, adding that Argentina’s decision to settle was ”nothing short of heroic”

The $4.65 billion represents 75 percent of the full judgments for the four hedge funds and includes principal, interest and a payment to settle the claims outside of the court, as well as ”certain legal fees and expenses incurred.”

The battle between the holdouts and Argentina reached a nadir under the previous president, Cristina Fernández de Kirchner, who called the holdouts ”vultures” and ”financial terrorists.”

Axel Kicillof, the former economy minister, even sought to question the impartiality of the mediator, Mr. Pollack, saying a year ago: ”If he takes off his jacket you can see his feathers,” referring to the vultures.

”For the first time in 15 years, we can say that Argentina has really started to exit default,” Alfonso Prat-Gay, Argentina’s new economy minister, told reporters in Buenos Aires on Monday, adding that the situation had ”drowned” the economy.

He attacked the Kirchner administration for refusing to settle the issue, adding that by letting the dispute fester, interest had accumulated and investors had lost confidence.

These lost investments and central bank reserves used to service tens of billion of dollars of debt in recent years could have been poured into the economy, creating up to two million jobs, Mr. Prat-Gay said.

Argentina would sell up to $15 billion in bonds from April to finance the payment, he added.

”Argentina is joining the world in an intelligent way,” Mr. Prat-Gay said.

That nation’s legislature could take most of March to debate whether to revoke the law, and a decision should be expected by the end of the month, according to Sergio Berensztein, an Argentine political analyst.

Despite the accord, Argentina’s bonds were little changed on Monday, showing that investors had already priced in a deal.

The reverberations from the legal battle with Argentina may be felt for years to come.

In 2012, the holdout hedge funds achieved a stunning breakthrough when Judge Griesa ruled that whenever Argentina wanted to pay any of its creditors, it would have to also pay the holdouts. The move and its fallout led Argentina to default on its debt again in 2014.

That move will have far-reaching implications, many analysts say. With his ruling, the judge has laid the foundations for future investors to contest the debt obligations of other countries.

Anna Gelpern, a law professor at Georgetown University, said that the ruling created a new tool for investors.

”The tool is a kind of financial boycott” that would allow creditors to enforce equal payment in other instances, she added.

Mr. Guzman went further, saying that the settlement created ”a problem of moral hazard in which this settlement incentivizes this type of behavior because it is profitable.”

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By Liz Moyer
1 March 2016

The announcement of a $4.65 billion agreement between the Argentine government and four ”holdout” hedge funds promises to end a 15-year battle that started when the government defaulted on $100 billion in debt in 2001.

The hedge funds refused to accept a steep discount in two restructurings over the years, while others took 30 cents on the dollar. The agreement announced on Monday gives the four holdouts — Paul Singer’s NML Capital, Mark Brodsky’s Aurelius Capital Management, Davidson Kempner Capital Management and Bracebridge Capital — 75 percent of their claims. Two other hedge funds struck an earlier agreement for 75 percent of their claims. The deal is subject to approval by Argentina’s Congress.

Here’s a look at some crucial moments of the fight over the years.

Oct. 11, 2012 Mr. Singer’s NML Capital persuaded the government of Ghana to freeze the Argentine Navy’s training ship, the Libertad, in port until Argentina put up millions of dollars. Months later, a United Nations tribunal ordered Ghana to release the ship, and it was allowed to sail home.

June 15, 2014 The United States Supreme Court refused to hear the Argentine government’s appeal on court orders to pay back the debt to the American hedge funds. It also voted 7-1 that bondholders could force Argentina to reveal where it owned property around the world.

June 15, 2014 Argentina’s president, Cristina Fernández de Kirchner, said she would refuse to pay back $1.5 billion to the ”vulture” hedge funds despite a court order. She called it extortion and said paying it could set off $15 billion in cash payments to other bondholders, which would be half Argentina’s central bank’s foreign reserves.

Sept. 29, 2014 Judge Thomas P. Griesa of the Federal District Court in Manhattan ruled that Argentina was in contempt of court, saying it would face repercussions for going against his orders on payments to bondholders.

2014 Graffiti around Argentina’s capital, Buenos Aires, called the hedge funds ”vultures” and popularized slogans such as ”Homeland or vultures” and ”Sovereignty or vulture swindle.” Judge Griesa’s caricature appeared in graffiti depicting vultures behind prison bars.

Nov. 22, 2015 Argentina elected Mauricio Macri as its new president, promising free-market policies in contrast to President Fernandez’s refusal to negotiate with the hedge funds. He has moved quickly to settle with bondholders, including a $1.3 billion deal with Italian investors.

Feb. 19, 2016 Judge Griesa lifted an injunction that barred Argentina from raising new money in bond markets or paying its creditors. The ruling depends on two things: Argentina has to repeal a law that prevents it from paying the holdout hedge funds, and it has to make full payments to bondholders who settle by Monday.

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By Peter Prengaman
March 01, 2016

BUENOS AIRES — Argentina and a group of US holdout creditors unveiled a deal on Monday in a longstanding debt standoff, potentially breaking an impasse that has kept the South American country on the margins of international credit markets and has led to a rewriting of the terms of debt issuance and negotiations worldwide.

The deal is a boost for President Mauricio Macri, who assumed power in December after campaigning on promises to modernize South America’s second-largest economy by solving the dispute and attracting foreign investment.

‘‘It gives me greatest pleasure to announce that the 15-year pitched battle between the Republic of Argentina and Elliott Management, led by Paul E. Singer, is now well on its way to being resolved,’’ arbiter Daniel A. Pollack said in a statement.

The agreement still must be approved by Argentina’s Congress, which would also need to revoke two laws that effectively ban such settlements. The ‘‘Lock Law’’ prevents Argentina from offering one group of creditors a better deal than others and the ‘‘Sovereign Payment Law,’’ passed in 2014, allowed Argentina to pay creditors with renegotiated debt in the face of a New York court order not to do so.

The 2014 law was passed at the behest of then-President Cristina Fernandez, who refused to negotiate with groups she called ‘‘vultures,’’ casting the fight as an American court trying to bully a sovereign nation.

Under the deal, Argentina would pay $4.653 billion to resolve all related claims, including those from Singer’s group in New York and other creditors around the world. The agreement would pay the funds managed by Elliot, Aurelius Capital, Davidson Kempner, and Bracebridge Capital about 75 percent of their judgments, the statement said.

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1 March 2016

NEW YORK/BUENOS AIRES (Reuters) – Argentina has agreed to a $4.65 billion cash payment to its main holdout creditors and will present the deal to Congress this week for a vote which would end 14 years of bitter legal battles and pave the way for its return to global credit markets.

Finance Minister Alfonso Prat-Gay said he hoped to issue two or three new sovereign bonds on international markets for a total of up to $15 billion in April if lawmakers were swift in backing the accord. The bonds would finance the payout to all holdout creditors who had reached an agreement, he said.

The vote will be a test of center-right President Mauricio Macri’s ability to garner cross-party support for his reform package to revive the struggling economy.

“This is a giant step forward in this long-running litigation, but not the final step,” mediator Daniel Pollack said.

The deal, agreed in principle late on Sunday, will see the four largest remaining holdout creditors get paid 75 percent of the amount outstanding on their judgments, including principal and interest, Pollack said.

Hedge fund Elliott Management, run by billionaire Paul Singer, brought numerous lawsuits against Argentina.

The legal saga involved years of court battles, street protests in Buenos Aires, the seizure of an Argentine naval vessel, and increasingly distorted economic policies as the government tried to avoid settling with the holdout creditors who blocked them raising capital on the international markets.

“He was a tough but fair negotiator,” Pollack said of Singer.

In a statement, Elliott said it was “pleased” to have reached an agreement that awarded it slightly better terms than the 72.5 percent accepted by some other investors earlier this month. Pollack said negotiations with remaining holdouts would be based upon the original offer Argentina made on Feb. 5 rather than using the agreement reached on Monday as a new baseline.

The other main holdout investors also included in the deal are Aurelius Capital Management, run by former Elliott alumni Mark Brodsky, as well as Davidson Kempner and Bracebridge Capital.

A spokesman for Aurelius declined to comment.

Argentina fell back into default in July 2014 after former leftist leader, Cristina Fernandez refused to negotiate better terms than those offered in bond swaps that followed Argentina’s then-record 2002 default on $100 billion.

Underlining the bitterness of the dispute, Fernandez blasted U.S. District Judge Thomas Griesa who oversees the cases as “senile” and branded the hedge funds “vultures.” Macri, a pro-markets advocate, made resolving the battle a priority after taking office in December.

January saw the beginning of weeks of marathon negotiations between creditors, Finance Secretary Luis Caputo and Pollack.

Prat-Gay said Argentina was taking the key step to curing its default and that Argentina was already in talks with banks over a new debt sale on global markets.

“We hope that if Congress reaches a decision quickly … we will probably be able to go to the market in April,” Prat-Gay told a news conference.

If the payment is not made by noon eastern standard time on April 14, 2016, then the agreement could become null and void if the two sides do not agree an extension.

The holdouts rejected two prior debt restructurings in 2005 and 2010 that paid out roughly 30 cents on the dollar. The investors who accepted those deals have not been paid interest since July 2014 after Griesa barred further debt payments until a deal was reached with the holdouts.

On Feb. 5, Argentina put forward a plan, saying it had a $6.5 billion pot of money with which to settle roughly $9 billion worth of claims filed before Judge Griesa.

Despite the deal, the main holdouts filed a motion in court on Monday urging Griesa not to lift the injunctions because there are many other plaintiffs who have not yet settled the dispute.


A final settlement would open financing options to Argentina’s new president as he tries to improve the country’s fiscal problems without imposing the kind of sharp spending cuts that have gotten previous Argentine leaders removed from office.

Under the terms of the agreement the holdout investors said they would not interfere with capital-raising.

Macri was elected in November promising free-market policies following eight years of protectionism under Fernandez.

“This is the equivalent of a giant albatross being lifted from Argentina’s neck,” said Aberdeen Asset Management’s head of emerging market debt, Brett Diment. “Argentina was facing a real financial squeeze this year. Now the litigation is resolved, the country should be able to access markets once again.”

Macri is expected to stress the need for Congress to approve a set of bills clearing the way for the deal with the holdout creditors when he presides over the opening of the 2016 Congressional session on Tuesday.

The government is confident it can muster the votes in both chambers, a task made easier after the main Peronist opposition party fractured earlier this month.

If the deal with Elliott and the other main holdouts is closed, it would leave more than 85 percent of the “pari passu” and “me-too” court injunctions resolved.

Prat-Gay said negotiations would continue with remaining holdout investors, including bondholders in Germany and Japan.

“We look forward to full implementation of the agreement, which should help Argentina return to the international capital markets and promote strong and sustainable growth,” a U.S. Treasury spokesperson said in a statement emailed to Reuters.

Argentine bonds were little moved by the accord.

“The implied yield at the moment would be about 8.25 pct on the restructured bonds so you could see that coming in to 7 – 7.5 percent,” said Stuart Culverhouse, head of research at emerging markets brokerage Exotix in London. “At that level it would be more than fair value so the scope for a big rally from here is probably limited.”

The 2033 U.S. dollar-denominated Discount bond was up marginally in price to bid 117.550, yielding 6.36 percent, according to Thomson Reuters data.

The 2038 Par bond closed up 0.5 percent at 65.69, yielding 7.06 percent .

(Reporting By Daniel Bases in New York, Hugh Bronstein and Richard Lough in Buenos Aires; Additional reporting by Nate Raymond and Tariro Mzezewa in New York; Editing by Clive McKeef, Andrew Hay and Bernard Orr)

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By Julie Wernau
Feb 29, 2016

Argentina’s $4.65 billion agreement in principle to pay holders of its defaulted debt promises to end a 15-year standoff that has been one of the longest and most contentious debt battles in history. Here’s a guide to the saga.

Q: How did Argentina get in this debt mess?

A: In 2001, embroiled in the worst economic crisis in the country’s history, Argentina defaulted on more than $80 billion in debt. That is to say, it stopped paying.

Q. Who owned those bonds?

A. Hundreds, possibly thousands of people. Among them: Argentine families, hedge funds and institutional investors.

Q. Did Argentina ever pay its creditors back?

A. Argentina agreed to replace the defaulted bonds with new bonds that were worth about 30 cents on the dollar. In two such deals in 2005 and 2010, 93% of creditors accepted the discounted bonds.

Q. What about the other 7%?

A. The other 7%, or the so-called holdout creditors, refused to take the offers. They’ve been battling with Argentina to get paid ever since.

Q. With so many creditors on board, why couldn’t Argentina force the remaining holdouts to take a deal?

A. Argentina had burned investors in the past; so, when it sold its bonds, to garner interest, it sweetened the deal by offering bonds that were designed to give bondholders confidence that they would get paid what they were promised. While other bonds come with clauses that would have forced holdouts to go along if most other bondholders accepted a deal, these bonds did not. The bonds were also proffered under U.S. law and bondholders were given the right to be treated equally to other
bondholders, but we’ll get to that later.

Q. How about you explain that equal-treatment thing now?

A. Under this equal treatment provision (something called “pari passu”), a court determined that Argentina couldn’t continue to pay some bondholders and not others. In 2014, a ruling on pari passu led the country to also default on $29 billion in debt held by bondholders who had accepted the debt exchange. The court said that if Argentina paid those bondholders, it would also have to pay its “vulture” hedge-fund creditors.

Q. Who called the hedge funds “vulture” funds?

A. Argentina’s former president Cristina Kirchner publicly denounced the country’s holdout creditors, calling them “vultures” who had bought the country’s defaulted bonds on the secondary market (after the default) with the intention to sue for massive profits.

Q. Did a court ever determine that Argentina should pay?

A. Yes. Repeatedly in some cases. Beyond the case involving the hedge funds, Argentina has been dealing with dozens of lawsuits in several jurisdictions involving more than 60 different kinds of bonds. Some of those bonds have the right to equal treatment, some do not.

Q. Did Buenos Aires pay?

A. No. But that didn’t stop Argentina’s largest creditors – a group of hedge funds owed billions led by Aurelius Capital Management and billionaire Paul Singer’s Elliott Capital Management – from doing everything they could to get paid. They sued in an attempt to seize the assets of Argentina’s central bank. They also attempted to seize
an Argentine vessel and prevent a satellite from launching.

Q. So what has changed recently?

A. In December 2015, Argentina elected a new president, Mauricio Macri, who made settling the country’s debts and re-entering the capital markets a top priority. Mr. Macri sat down with creditors for the first time in February. He then made a unilateral offer to all holdouts that was met with mixed reviews. Some bondholders immediately accepted the deal. The vast majority did not. Finally, on Monday the negotiator in the case announced a $4.65 billion agreement between Argentina and the
major holdout hedge funds.

Q. What are the obstacles?

A. Several. First, Argentina’s Congress has passed something called a “lock law,” which forbids Argentina from paying any holdout bondholders any more than it offered in the 2005 and 2010 restructurings. Mr. Macri doesn’t hold a majority in Congress and in order to have that law lifted, he will need to convince lawmakers that he isn’t rolling over for hedge funds that even the local press call “vultures.” Second, even if creditors accept the deal, a U.S. federal judge would have to agree to lift the pari passu injunction before anyone would get paid. Third, none of this bars the possibility of “holdout holdouts”– smaller bondholders who feel they were treated unfairly and appeal to a higher court in order to block anyone from getting paid.

Q. What happens next?

A. U.S. District Court Judge Thomas Griesa has agreed to hear from both sides on Tuesday about whether an injunction should be lifted.

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By Patrick Gillespie
February 29, 2016

Argentina’s 15-year debt battle is finally coming to an end.

Its government reached an agreement with major American hedge funds that it had battled with since the country broke the record books and defaulted on $95 billion of debt in 2001.

Argentina agreed to pay a group of hedge funds led by NML Capital and its owner, billionaire Paul Singer, $4.6 billion. That represents 75% of the claims that the hedge funds had sued Argentina for, according to a statement issued Monday by the mediator in the case, Daniel Pollack.

The agreement would open the doors to allow foreign investment into Argentina again. It had been shut out of foreign capital markets since 2001. The hedge funds — known as “vultures” in Latin America — sued Argentina shortly after buying its defaulted debt and a battle ensued for 15 years.

“It’s a very important step,” said Mauro Roca, senior economist at Goldman Sachs. “The country needs foreign investment to finance growth and development.”

Without foreign investment, Argentina’s economy has stagnated and suffered mightily from inflation, which has risen over 25% annually in recent years.

Argentina’s Congress still needs to approve the deal. It first needs to repeal two laws created under the former president, Cristina Fernandez de Kirchner, that forbade paying these hedge funds. It’s expected that Congress will repeal the laws and approve the deal.

A New York judge overseeing the case, Thomas Griesa, is also expected to lift an injunction that prevented Argentina from paying other bondholders until it reached an agreement with these holdout firms. Griesa signaled last week in a statement that he was heavily leaning towards lifting the injunction at a hearing on Tuesday.

The country’s new president, Mauricio Macri, came into office in December determined to end the 15-year battle. His cabinet had been negotiating with the hedge funds since December.

After Argentina battled the hedge funds for 15 years, Macri’s team closed in a deal in under three months.

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By Katia Porzecanski, Charlie Devereux and Bob Van Voris
February 29, 2016

Ø Argentina agrees to pay holdouts $4.65 billion, 75% of claim

Ø Accord will help bring end of isolation from bond market

Paul Singer versus the republic of Argentina is over.

Some 15 years after the country carried out the biggest sovereign default ever, and 13 years after the hedge-fund billionaire first sued for repayment, the two sides reached a settlement late Sunday. The deal marks a major milestone for Argentina and its new president, Mauricio Macri, restructuring the lion’s share of the debt remaining from the default and freeing up the nation to tap international markets for much-needed financing as its commodities-rich economy falters.

It also brings a close to a bruising, at times ugly, conflict that cost both sides dearly over the years — in legal fees, lost investment opportunities and countless headaches. Argentina had even become something of a pariah state, unable to fly its presidential plane or dock its naval ships in some cities abroad out of fear they’d be seized by Singer’s lawyers. In financial circles, the two names will be forever linked, like George Soros and the Bank of England or Jim Chanos and Enron. And their drawn-out feud serves as a cautionary tale for both cash-strapped governments flirting with default and the combative speculators looking to fight them in court.

“It’s definitely the longest, high profile holdout case I’ve ever seen,” said Edwin Gutierrez, a money manager at Aberdeen Asset Management. “There are some, but none have been this high profile and of this magnitude.”

The accord, which triggered gains today in Argentine bonds, calls for the country to pay $4.65 billion in cash to Singer’s Elliott Management and fellow hedge funds Aurelius Capital Management, Davidson Kempner and Bracebridge Capital, according to a court-appointed mediator. The amount includes $4.4 billion for 75 percent of almost $5.9 billion in principal and interest of claims in New York, as well as $235 million for claims outside that jurisdiction and some of the holdouts’ legal fees, the mediator, Daniel Pollack, told reporters Monday in New York. The nation will raise the funds it needs in overseas bond markets and the agreement will expire April 14, he said.

After years of dealing with former President Cristina Fernandez de Kirchner’s intransigence on the issue and her seeming disinterest in adhering to U.S. law, New York courts have lauded Macri’s efforts to make good on his campaign pledge to put an end to the litigation shortly after beginning his term in December. Officials began traveling to New York to meet with creditors in January and published their first proposal to creditors Feb. 5.

Deal Terms

Terms of the agreement are better than the previous offer of 72.5 percent of creditors’ claims and mark a significant improvement from earlier restructurings that imposed losses of about 70 percent on debtholders. About 7 percent of creditors, including Elliott, rejected those initial terms — which were offered in 2005 and then again in 2010 — and pursued repayment in court.

“We are pleased to have reached an agreement,” Elliott said in a statement.

The dispute had deteriorated over the years into a contentious affair that bordered on the uncivilized on many occasions, like when Fernandez called the 85-year old judge who presided over the case “senile” or referred to Singer as a “Vulture Lord” and “bloodsucker.” As Singer ramped up his efforts for repayment — at one point he briefly seized a naval vessel — the feud evolved beyond an issue of paying one’s debts into one of defending national pride and sovereignty that Fernandez tried to pass along onto the next generation.

Video games, board games and cartoons were created to teach children about the dangers of vulture investors, and the business school at the University of Buenos Aires boasts a debt museum devoted to the saga. After Argentina won the World Cup semifinals in 2014, the crowd’s patriotic victory chants devolved into a profanity-laced taunt of the hedge funds. Even toward the end, as Macri’s team took over the talks, the two sides were still sniping at each other: The hedge funds described Argentina’s recent legal tactics as manipulative and abusive, while Finance Minister Alfonso Prat-Gay had said that if talks stalled, it wouldn’t be Argentina’s fault.

Singer’s Role

Ultimately, Pollack said of the Argentine officials involved in the talks that “their course-correction for Argentina was nothing short of heroic” while Singer “was the central figure who involved himself intensely with me over the past several weeks on behalf of the ‘holdout’ bondholders. He was a tough but fair negotiator.”

While the announcement was widely expected, markets posted small gains today. Prices on the government’s benchmark bonds due 2033 climbed to 117.8 cents on the dollar while yields on local-law bonds due 2017 declined to 6.41 percent.

The agreement comes weeks after Argentina agreed to pay almost $2 billion to other holdouts, as well as another $1.34 billion to 50,000 Italian bondholders.

The accord with Elliott still requires approval from Argentina’s Congress, which also needs to repeal a law that currently prevents the country from proposing terms to the holdouts that are better than those the nation offered creditors in restructurings. Congress reconvenes in March.

“I don’t think the terms of this agreement would be the reason why they don’t get this approved,” said Diego Ferro, co-chief investment officer of Greylock Capital Management. “There’s nothing outrageous or surprising about this deal for the opposition to use it as an excuse.”

Only a small group of holdout creditors now remain. Pollack said he will continue to broker negotiations between them and the government, working off of the framework laid out in the Feb. 5 proposal. Michael Spencer, an attorney for a group of smaller investors with more than $832 million of claims on defaulted bonds, said his clients haven’t been able to negotiate directly with Argentina yet. “I hope they are motivated to offer my clients an even better deal,” he said by phone.

Bond Sales

With approval from U.S. District Judge Thomas Griesa, the settlement will probably allow for the release of about $3 billion of interest payments that he’s blocked since mid-2014 and the reversal of his orders prohibiting Argentina from paying restructured bonds unless the holdouts were also paid. Fernandez had refused to comply with the ruling, pushing the nation into a second default.

After eight years of Fernandez policies that drove away investors, Macri needs to lure foreign money to revive a faltering economy and replenish foreign reserves that hit a nine-year low in December. Within his first week in office, he lifted capital controls that had prevented companies from repatriating dividends and devalued the peso, ending years of a gradual-decline policy that kept the currency overvalued as inflation soared.

The accord with the holdouts is the final step to allow Argentina to return to international credit markets. The country, which hasn’t sold bonds abroad since the default, has settled arbitration cases at the World Bank, paid Spanish oil company Repsol SA for the expropriation of YPF SA and negotiated with the Paris Club of creditor nations.

The holdouts, who have tried to thwart Argentina’s past attempts to raise funds internationally, won’t interfere in the nation’s attempts to raise capital for the settlement, Pollack said.

Alejo Costa, the head of strategy at Buenos Aires-based brokerage Puente, estimates Argentina will need to issue about $11 billion dollars to pay the holdouts and an additional $8 billion dollars to fund its fiscal needs. Selling that much debt, especially at a time when emerging markets are suddenly out of favor, “will require the government to do a good job communicating its strategy on the fiscal and monetary side.”

Prat-Gay and Finance Secretary Luis Caputo are wasting little time in delivering that message. They’re scheduled to hold a press conference at 6 p.m. today in Buenos Aires.

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By Peter Prengaman
Feb. 29, 2016

Argentina and a group of U.S. holdout creditors announced a deal on Monday in a longstanding debt standoff, potentially breaking an impasse that has kept the South American country on the margins of international credit markets

BUENOS AIRES, Argentina (AP) — Argentina and a group of U.S. holdout creditors announced a deal on Monday in a longstanding debt standoff, potentially breaking an impasse that has kept the South American country on the margins of international credit markets and led to a rewriting of the terms of debt issuance and negotiations worldwide.

The deal is a boost for President Mauricio Macri, who assumed power in December after campaigning on promises to modernize South America’s second-largest economy by solving the dispute and attracting foreign investment.

“It gives me greatest pleasure to announce that the 15-year pitched battle between the Republic of Argentina and Elliott Management, led by Paul E. Singer, is now well on its way to being resolved,” arbiter Daniel A. Pollack said in a statement.

The agreement still must be approved by Argentina’s Congress, which would also need to revoke two laws that effectively ban such settlements. The “Lock Law” prevents Argentina from offering one group of creditors a better deal than others and the “Sovereign Payment Law,” passed in 2014, allowed Argentina to pay creditors with renegotiated debt in the face of a New York court order not to do so.

The 2014 law was passed at the behest of former President Cristina Fernandez, who refused to negotiate with groups she called “vultures,” casting the fight as an American court trying to bully a sovereign nation.

Under the deal, Argentina would pay $4.653 billion to resolve all related claims, including those from Singer’s group in New York and other creditors around the world. The agreement would pay the funds managed by Elliot, Aurelius Capital, Davidson Kempner and Bracebridge Capital about 75 percent of their full judgments, according to the statement.

Speaking to reporters in New York, Pollack declined to provide more specifics agreement. He said April 14 is the deadline to finish the deal, but added that it could be extended if both sides agree. He described grueling negotiations in recent months, joking that it “felt like a thousand years to me.”

The deal “closes a chapter by putting an end to the debt default saga which limited Argentina’s access to international capital markets,” said Alberto Ramos, chief Latin America economist for Goldman Sachs, predicting that it would also lead to an influx of investment in Argentina.

The debt conflict goes back to Argentina’s 2001-2002 financial collapse, when it defaulted on $100 billion in debt. Most creditors renegotiated in 2005 and 2010 bond swaps. But a group of creditors led by billionaire hedge fund manager Singer refused and took Argentina to court in New York, under whose laws the debt was issued, and won.

New York federal court Judge Thomas Griesa has repeatedly ruled against Argentina, saying the country had to pay the holdouts before it could pay other creditors with renegotiated debt. Those rulings have kept Argentina from accessing international credit markets, forcing it to issue domestic bonds to raise funds and search for backdoor financing from countries like China.

The long, costly fight led to changes in how debt is issued worldwide. Many countries have restructured contracts in attempts to avoid getting into similar situation.

While Macri has good relations with many members of Congress, passage of the deal is not a given. Fernandez’s Peronist Party maintains a majority in the Senate and the largest bloc in the lower house.

However, the Peronists have been fractured since Fernandez’s chosen candidate, Daniel Scioli, lost the election to Macri in November. And business leaders across sectors along with governors in the provinces have joined the federal government in arguing that the country desperately needs foreign investment.

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By Jim Zarroli
February 29, 2016

Argentina has reached an agreement with some of its creditors that should help end a long and acrimonious dispute that has blocked the country from the international bond markets.

The deal, which must be approved by Argentina’s Congress, calls for the government to pay $4.653 billion to four of the so-called holdout U.S. hedge funds. That equals about 75 percent of what they claimed they were owed.

Argentina defaulted in 2001 and has been trying to restructure billions of dollars in debt, but a group of hedge funds, led by Paul Singer’s Elliott Management, refused to go along and sued that country’s government in U.S. federal court.

U.S. District Judge Thomas Griesa subsequently issued an injunction barring Argentina from paying some of its creditors without also paying the holdouts, and the government went into default again in 2014.

The legal fight wound up before the U.S. Supreme Court, which in 2014 upheld lower court rulings and essentially required Argentina to pay the holdouts.

The court battle had lapsed into a bitter political fight, with former Argentine President Cristina Fernández de Kirchner labeling the holdouts “vulture funds.” Meanwhile, Argentina was essentially blocked from borrowing any more money in the bond market.

But everything changed after the November election of President Mauricio Macri, who vowed to end the dispute during his campaign.

“The current administration realized that Argentina cannot be shut down from the international markets, so from the beginning they said, ‘We’re going to fix this problem,’ and that’s what they’re doing,” said Diego Ferro, co-chief investment officer at Greylock Capital Management, in an interview with NPR.

Earlier this month, Judge Griesa agreed to lift the injunction that blocked Argentina from paying its creditors.

The settlement between Elliott Management and Argentina was announced this morning by Daniel A. Pollack, the special master appointed by the court to oversee settlement talks.

The deal does not completely settle Argentina’s debt woes, since some smaller bondholders continue to resist restructuring, Ferro says. But they lack Elliott’s resources and constitute a smaller threat to the government.

“With the biggest, most sophisticated holdouts settled and dropping their claims, I think that Argentina should feel a lot more comfortable going into the markets,” said Anna Gelpern, a professor at Georgetown Law School and a nonresident senior fellow at the Peter G. Peterson Institute for International Economics.

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29 February 2016

BUENOS AIRES, Feb 29 (Reuters) – Argentina’s national statistics agency said on Monday it would resume publishing inflation data in June after a half-year hiatus in order to revamp and restore credibility in the way it calculates consumer price increases.

Under former President Cristina Fernandez, data produced by Argentina’s INDEC statistics office was broadly seen as inaccurate and politically motivated. In particular, it routinely estimated inflation at about half the rate of private forecasts.

Critics said Fernandez’s populist government massaged the data to reduce payments on its inflation-indexed debt load and rein in inflation expectations.

But when new, business-friendly President Mauricio Macri took office last December, he installed a new INDEC director who announced a total overhaul of the agency in a bid to restore the credibility of its data. The publication of new statistics was suspended until the revamp was completed.

“In June, we will return to publishing the Index of Consumer Prices,” said INDEC chief Jorge Todesca, adding that it would be based on data from Buenos Aires city and suburbs showing the evolution of prices between April and May.

Private economists estimate consumer prices are rising around 30 percent on the year. Finance Minister Alfonso Prat-Gay has said he aims to bring it down to around 5.0 percent by the end of the government’s term in 2019.

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By Daniel Fisher
29 February 2016

Paul Singer‘s Elliott Associates and a handful of other holdouts scored a near-total victory over the Republic of Argentina as that country agreed to pay $4.75 billion — three-quarters of what they were owed — to settle claims over defaulted government bonds.

The settlement represents the price Argentina had to pay to re-enter world credit markets after losing a pivotal appeal to the U.S. Supreme Court in 2014. And it could increase confidence in other emerging-market debt as investors begin to reassess the ability and willingness of countries to pay interest on their beaten-down bonds.

“Argentina has gone from 12 years of policy deterioration to exceptional government policy” under President Mauricio Macri, said Colm McDonagh, head of emerging-market debt at BNY Mellon’s Insight Investment unit. “They can go and borrow now, and people will start bringing money back onshore.”

Argentina’s capitulation comes just a few weeks after “the peak of bearishness” in emerging-market debt, said McDonagh.With yields on dollar-denominated bonds ranging from 7-15% for sovereign debt in countries like Argentina and Ivory Coast and real yields on local currency bonds running from 3.5% for Mexico to 5% for Romania, he said, emerging-market debt finally offers enough return to reward taking a risk.

“We’re going to clients now and saying you’ve got to look at EM,” said McDonagh, whose group oversees $3 billion in assets. “You’re starting to see policy action from some of these countries.”

Singer’s NML Capital, managed by Elliott Associates, was among a small group of holdouts that resisted Argentina’s attempt to restructure some $24 billion in debt the country defaulted upon in 2001 by issuing new bonds of lesser value. The holdouts brought 11 lawsuits in federal courts in New York and won all of them, including a Second Circuit Court of Appeals decision prohibiting Argentina from paying on the new bonds unless it also paid the hedge funds their pro rata share of what is owed.

Other funds joining in the final settlement negotiated Sunday evening were Aurelius Capital Management, Davidson Kempner, and Bracebridge Capital, according to the special master in the case, Daniel A. Pollack. The settlement represents 75% of the principal and interest owed, and Argentina also will pay some of their legal fees.

Argentina fought hard under former President Cristina Kirchner to avoid paying the hedge funds full value for bonds they mostly bought at deep discounts after the default. Incoming President Macri took a different tack after winning election in November, immediately launching round-the-clock negotiations to resolve the bond dispute.

“Their course-correction for Argentina was nothing short of heroic,” said Pollack in a statement, and Singer “involved himself intensely with me over the past several weeks on behalf of `holdout’ bondholders. He was a tough but fair negotiator.”

The settlement may mark a low-water mark for emerging market bonds, which fell out of favor after climbing on euphoric predictions of rapid economic growth and the idea they offered diversification from the industrialized economies.

“People just went on a hunt for yield and didn’t distinguish the type of risk they were taking,” McDonagh told me. “The peak of that was in 2011.”

Plunging commodity prices crimped the finances of many of those countries and now they are forced to make tough policy choices, such as cutting spending and popular subsidies, to keep paying their debts. Copper-dependent Zambia was able to sell its 5 3/8% bonds at par during the boom and now, with copper prices down, its debt is trading at a 12% yield.

“We’d actually imagine the true risk premium is somewhere in between,” he said.

Eastern European countries are “almost looking like bastions of security, he said. And across Latin America countries like Argentina are starting to restructure their fiscal policies to deal with slow or negative economic growth.

“We think now, even though they’re in a difficult place, you’re being paid to take risk,” he said.

One exception: Venezuela, where inflation is raging amid shortages of all manner of consumer goods.

“The economy there is deteriorating so badly we’re not sure what changes can be made by the current government to make it better,” he said.

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14. IT’S BEEN EMOTIONAL (Financial Times (FT.Com))
By Joseph Cotterill
29 February 2016

It gives me greatest pleasure to announce that the 15-year pitched battle between the Republic of Argentina and Elliott Management, led by Paul E. Singer, is now well on its way to being resolved…

– Daniel Pollack, Special Master in the pari passu deal negotiations

Could it be? Is it over?

The $4.6bn deal (in principle) announced on Monday involves four big pari passu holdouts, including Elliott’s NML.

They have reached agreement days after Judge Thomas Griesa said he would lift his injunction on Argentina to pay holdouts alongside restructured bondholders, which had set off this saga and (along the way) an Argentine sovereign default.

The holdouts would get 75 per cent of their claims on Argentina. Its offer this month, made both to holdouts with judgments on defautled bonds and those building up hefty post-dated interest on pre-judgment debts, had been 70 per cent. (It also paid another holdout 100 per cent of his claim to settle, of course.)

The difference is likely to be more than 5 per cent as Argentina’s specific treatment of that post-dated interest had been a big issue. Argentina will also be paying the holdouts back certain legal fees which, in a litigation which has taken the best part of a quarter of a century, may not be minuscule. Under a deal, Argentina would have to repeal a law against paying holdouts, and issue bonds to raise cash for payment.

According to Mr Pollack (who gets quite emotional in his statement about “nothing short of heroic” President Macri of Argentina and Elliott’s Paul Singer, “a tough but fair negotiator”):

No party to a settlement gets everything it seeks. A settlement is, by definition, a compromise and, fortunately, both sides to this epic dispute finally saw the need to compromise, and have done so.

We’ll be analysing the deal, where we go from here, and whether this saga will bloody end at last later this week.

But for now — some questions to consider:

* Is it actually a deal that has delivered equal treatment to anyone, like you might perhaps have expected from a 15-year pitched battle over the meaning of an 80-word equal-treatment clause?

* Will the creditors holding the remaining 15 per cent of Argentina’s defaulted debt follow Elliott’s lead?

* Did Judge Griesa’s injunction change Argentina’s behaviour at all, or was it all just Mauricio Macri’s election? (Alternatively, did Griesa help Macri win?)

* Does the way Griesa lifted the injunction mean pari passu won’t be so powerful against other sovereign debtors in future?

* Because no sovereign would ever leave itself this vulnerable to a pari passu lawsuit again, right?

Judge Griesa is supposed to have a hearing about lifting the injunction on Tuesday. If you’re in Manhattan and have a good supply of popcorn, it may be your last chance.

Then again, knowing this saga, it may well not.

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By Pan Kwan Yuk
29 February 2016

Break out the bubbly. Argentina on Monday reached an agreement in principle to end its decade-long legal dispute with its remaining holdout creditors in a move that should clear the way for the ailing South American country to return to the international capital markets and allow it to raise much needed cash to stimulate the economy.

The court-appointed, so-called “special master” Daniel Pollack said in a statement that Argentina has agreed to pay a group of holdouts, led by US billionaire Paul Singer’s Elliott Management, $4.65bn, to settle the dispute.

The agreement – which will see the holdout funds take a haircut of around 25 per cent on their claims – still needs to be approved by the Argentine congress and will require the country to repeal several laws put in place by the previous administration that barred it from making such settlements.

An agreement would represent a huge political victory for Mauricio Macri, Argentina’s newly elected market-friendly president, who made putting an end to the dispute a key campaign promise in elections last year.

A deal would also put an end to Argentina’s second default this century in 2014, after the holdouts’ 2012 legal victory in the New York prevented the country from continuing to service debt to holders of restructured debt. It could also lead to upgrades by credit rating agencies, Argentina’s inclusion in emerging market bond indices, and open the door to a return of foreign investment.

As Moody’s, which has a Caa1 deep junk rating on Argentina, said in a note last week:

In the short term, Argentina’s main credit challenge is the definite resolution of the legal issues with holdout creditors which led to the 2014 default.

An agreement with litigating holdouts is a necessary precondition for the country to restore access to international capital markets, providing much needed funding options for fiscal deficit that may end close to 5% of GDP in 2016.

Resolution of the legal problems does not require that all litigating bondholders reach an agreement but it does require a decision by US courts lifting the payment injunctions which led to the 2014 default and currently block international borrowing.

MONDAY, March 1st




28 February 2016

ROME, Feb 28 (Reuters) – Argentina’s president is confident that long-running litigation over billions of dollars in defaulted bonds can be resolved within weeks, he said in an interview published on Sunday.

Cash-strapped Argentina has been battling creditors for more than a decade after it defaulted on about $100 billion in sovereign debt. A deal could allow it to go back to global capital markets for financing.

“I am confident the court proceedings with the creditors can be closed within a couple of weeks; confident and optimistic,” President Mauricio Macri, who was elected in November on an open-markets platform, said in an interview with Italian newspaper Corriere della Sera during a visit to Rome.

Settlement talks have been making progress, a mediator said last week, after creditors who have been suing Argentina in U.S. courts said that broad terms of an agreement were in place.

Since taking office, Macri has lifted trade and currency controls, triggering a steep fall in the local peso. He has also reduced taxes on farmers and ditched export curbs in an effort to increase production.

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By Taos Turner
26 February 2016

BUENOS AIRES–A federal judge called on former President Cristina Kirchner to testify in court over accusations that her central bank president cost Argentina’s government billions of dollars by illegally trading derivatives.

Federal Judge Claudio Bonadio made the request Friday as part of an investigation into allegations that the central bank sold $17 billion worth of dollar futures contracts at artificially low prices.

The judge called on Mrs. Kirchner to testify April 13. Mrs. Kirchner’s allies immediately took to social media networks to call for a mass protest at the federal courthouse that day.

Judge Bonadio’s request comes after allies of President Mauricio Macri in October filed a criminal complaint against Alejandro Vanoli–then the central bank’s president–for selling futures contracts for 10.6 pesos to the dollar when the market rate was closer to 15 pesos.

Mr. Vanoli couldn’t be reached Friday for comment.

After taking office in December, Mr. Macri devalued the peso, which now trades at around 15.60 to the dollar. For the central bank to fulfill the contracts sold at 10.60 pesos to the dollar, it has to fund the difference.

In a three-page legal filing Friday, Judge Bonadio said this cost the bank about $500 million in December and January alone. He indicated the bank could lose another $2.6 billion when it pays out contracts between now and June.

Mrs. Kirchner couldn’t be reached for comment.

The judge also called for testimony from Mr. Vanoli, former Minister of Economy Axel Kicillof and a dozen other former officials.

When reached for comment, a representative for Mr. Kicillof referred The Wall Street Journal to a Friday interview on Radio del Plata.

“This case was pushed by people that are now in Macri’s government,” Mr. Kicillof said in the interview. “The case is baseless. They devalued and now they’re blaming the cost of the devaluation on us.”

Bernardo Saravia Frías, an attorney who helped write the criminal complaint last year, said the central bank was the only entity offering dollars at below-market rates. “This allowed for a few sophisticated investors to make a lot of money, but it also cost the country a lot of money,” he said.

If any officials were convicted of breaking the law by approving of the sale of the futures contracts, they could face up to six years in jail, Mr. Saravia Frías said.

“The judge made this decision on the suspicion that officials may have committed a crime,” said Ricardo Gil Lavedra, another attorney who wrote the criminal complaint. “He is calling on them testify to see what they have to say. Once that happens, he will have to either indict them or dismiss the accusations.”

Judge Bonadio couldn’t be reached and Argentina’s central bank declined to comment.

From a legal standpoint, the central bank’s charter allows it to sell derivatives at market rates.

Mr. Vanoli has said that by selling the dollar futures the bank was simply trying to keep the peso stable and avoid a currency devaluation. He has defended his actions, saying that Argentina’s 2016 budget called for an exchange rate similar to that included in the futures contracts.

Mr. Vanoli couldn’t be reached Friday for comment.

“It’s a pity that the current government carried out a currency devaluation,” a tweet posted on Mr. Vanoli’s Twitter account said Friday.

Feb 28, 2016

Paleontologists in Argentina have announced the discovery of a major Jurassic-era fossil site four years after it was first discovered.

The site, which spans 23,000 square miles in Patagonia in southern Argentina, came to light this week with the publication of a report in the journal Ameghiniana.

“No other place in the world contains the same amount and diversity of Jurassic fossils,” said geologist Juan Garcia Massini of the Regional Center for Scientific Research and Technology Transfer (CRILAR).

Coaxing Patagonia Back To Its Natural State

The fossils — between 140 and 160 million years old — lie on the surface because they were recently exposed by erosion, said Garcia Massini, who leads the research team investigating the site.

“You can see the landscape as it appeared in the Jurassic — how thermal waters, lakes and streams as well as plants and other parts of the ecosystem were distributed,” he said.

The fossils were preserved almost immediately, in less than a day in some cases.

Dinos Got High, Oldest Grass Fungus Fossil Hints

“You can see how fungi, cyanobacteria and worms moved when they were alive,” Garcia Massini said of the site that lies along the Deseado Massif mountain range.

Ignacio Escapa of the Egidio Feruglio Paleontology Museum said the researchers had found “a wide range of micro and macro-organisms.”

The fossils are so well preserved, that researchers say each rock extracted from the site could possibly open the door to a new discovery.

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