NML Capital v. Argentina

November 11, 2014 By Fausta

Argentina: Jorge Lanata will petition US Court re: Cristina’s US businesses

The headline is less tactful,
Argentinean Journalist to file petition in U.S. Courts to obtain information about Cristina Kirchner’s money laundering operations

Last night, Argentinean renowned investigative journalist Jorge Lanata announced he is planning to submit an application for an order for discovery pursuant to 28 U.S.C. § 1782 in a Nevada District Court, aiming to obtain information related to President Cristina Kirchner’s companies in the United States.

Section 1782 of Title 28 of the United States Code is a federal statute that allows a party to a legal proceeding outside the United States to ask an American court to obtain evidence for use in the non-US proceeding. The full name of Section 1782 is “Assistance to foreign and international tribunals and to litigants before such tribunals”.

For the last two years, Jorge Lanata has been conducting an investigation known as the “Kirchner Money Route”, through which he demonstrated that Kirchner cronies were laundering millions of dollars coming from corrupt activities through a vast networks of shell companies and shady financial institutions in Argentina, Uruguay, Panamá, Switzerland, Seychelles Islands and the U.S., among others.

This investigation was then used by NML Capital Ltd., a hedge fund who holds a judgment against Argentina for more than $1.7 Billions (see NML Capital Ltd. vs. Republic of Argentina), as the main source of evidence to produce information about 123 companies in the State of Nevada that may point to the location of Cristina Kirchner’s assets in the United States and abroad. NML Capital Ltd. was able to depose a key witness to the “K-Money Route”. However, that deposition is being sealed by the request of the parties.

In Spanish, Lanata’s Sunday show.

More on NML bond holdouts:
A New Twist in the Argentine Debt Saga

But Dart’s legal complaint draws attention to something that had been overlooked as the talks progressed: The so-called Gang of Five—the five holdouts at the center of Singer’s legal case: Singer’s NML Capital, Aurelius Capital, Blue Angel Capital, Oliphant, and a small group of retail investors—hold only about a quarter of all the New York bonds held by holdouts. In addition to Dart, there are approximately $2.4 billion worth of bonds out there that are governed by New York law and in the hands of other holdout investors. The minute Argentina settles with Singer’s group and the bondholder payments are allowed to flow through, all the other holdouts will likely rush forward to Judge Thomas Griesa’s court, demanding the same legal rulings and the same terms, which could block the payments again. The default could be cured temporarily, but then Argentina would be right back where it started.

NML Capital Ltd. can’t force an Argentine lawyer to remain in the U.S. for questioning, a Washington judge ruled

NML sought an emergency court order last week barring attorney Cesar Guido Forcieri, a former World Bank director, from returning. There’s no reason NML can’t question Forcieri when he gets to Argentina, U.S. District Judge Royce Lamberth said in a one-page order issued Nov. 6 and made public today.
. . .
Forcieri is a close associate of Argentine Vice President Amado Boudou, NML said in court papers. Boudou was indicted in June by an Argentine federal court on corruption charges related to his alleged involvement in acquiring a bankrupt printing company, Ciccone Calcografica SA, that later won contracts to print the nation’s currency.

Boudou was initially indicted with five others. In September, an Argentine judge indicted Forcieri for his alleged role in helping to steer business to Ciccone. If Argentine courts find Boudou guilty, the country may confiscate any profit, funds or property employed in the takeover scheme, according to NML’s lawyers.

Until last month, Forcieri served in Washington as a World Bank director for Argentina, Bolivia, Chile, Paraguay, Peru and Uruguay. He worked with Argentina’s Ministry of Economy and Public Finances as a G-20 finance deputy from 2010 until March, according to a profile on LinkedIn.

NML served Forcieri with a subpoena on Sept. 10 seeking documents regarding his involvement in the alleged Ciccone scheme. The Argentine lawyer failed to appear for a deposition on Oct. 20, NML said.

This ain’t over yet, not by a long shot, no matter what the SCOTUS ruled.

August 27, 2014 By Fausta

Argentina: Enter Soros

A new player enters the litigation picture:

Argentina default: George Soros sues US bank in London over $500m payment
Hedge funds take legal action against Bank of New York Mellon for freezing payment by Argentina, which has also banned the lender from operating in the country

The billionaire investor, who famously “broke the Bank of England” after shorting the pound, is joined by Knighthead Master Fund, RGY International and Kyle Bass’ Hayman Capital Master Fund in the lawsuit against Bank of New York Mellon.

According to Bloomberg News, the group owns more than 1.3 billion of euro-denominated bonds.

Bank of New York Mellon said: “The suit is without merit. BNY Mellon has consistently followed the binding court orders that govern its actions as trustee in this matter.”
In a further twist, Argentina banned Bank of New Mellon from operating in the country, arguing that the lender “isn’t complying with its operational objectives”.
Bank of New York Mellon declined to comment on the ban.
Argentina is attempting to replace Bank of New York Mellon as trustee with state-run Banco Nacion

Soros has invested heavily in Argentina, particularly in YPF SA and Adecoagro SA.

August 21, 2014 By Fausta

Argentina’s shell game

Argentina tries to sidestep US ruling with debt swap
“Nervous” Argentina president Cristina Fernandez de Kirchner announces plan to replace Bank of New York Mellon as trustee with state-run Banco Nacion, because, of course, that would mean Cristina gets what she’s been after all along.

As for that lawsuit Cristina’s government brought to the International Court of Justice in The Hague, claiming the US had “committed violations of Argentine sovereignty”?

The US government must consent to the ICJ’s jurisdiction before the UN can proceed with the case.

She ought to hire this guy; he’d do a better job,

August 19, 2014 By Fausta

Argentina: “Qui cum canibus concumbunt cum pulicibus surgent”

Looks like Citibank lied down with dogs, and is now covered with fleas:

Citibank could lose Argentina banking license

If the banking giant obeys a US judge’s order, it risks losing its banking license in Argentina — and the $2 billion it has in local deposits.

But if it follows Argentine law, it risks violating a US federal court order.

Play me the world’s smallest violin: It’s not looking good,

In a recent speech, Kirchner reminded Citi of its obligations under Argentine law and noted that her government decides who gets banking licenses in the country.

The potential fallout is a major concern for Citi, which has a huge retail banking presence in Argentina — and throughout South America, which is siding with Argentina.

About 18 percent of Citi’s revenues come from Latin America.

August 1, 2014 By Fausta

Argentina: Cristina gives bondholders the raspberry

As I predicted,
Argentine Leader Defies Wall Street for Main Street
Argentines awoke Thursday to find their country was once again a financial pariah after the populist President Cristina Kirchner stared down Wall Street hedge funds and pushed her country into its second default in 13 years. Very little downside for her, since

Her refusal to settle with bondholders owed $1.6 billion could prove politically expedient in the short term: It distracts from Argentina’s slowly crumbling economy and shores up her support among many working-class Argentines who form the base of her Peronist movement, economists and analysts say.

Higher inflation, deeper recession?

Here in this sprawling capital, Argentines reacted with a mix of pride and disinterest. Pride because Mrs. Kirchner stood up to foreigners, mostly Americans and Wall Street, and disinterest because unlike the country’s record $100 billion default in 2001, this one doesn’t mean Argentina is suddenly broke and on the verge of financial collapse.

It’s all about power, folks.

UPDATE:
Stop spouting ‘half truths’ over default, US judge tells Argentina
South American country’s reaction to second default in 12 years does not alter the fact it has to pay what it owes, judge says

June 21, 2014 By Fausta

Argentina: Cristina can’t pay up . . .

So she keeps looking for a settlement:
As posted earlier, the SCOTUS not only ruled that Argentina can’t make payments on its restructured debt unless it also pays the holdouts, but also that the creditors can get access to a wide number of bank records to locate financial assets overseas that they might be able to seize as compensation.

Cristina Fernandez gave a speech about “vulture funds”, and came up with this (emphasis added),
Argentina Wants to Settle With Holdout Creditors
Argentine President Cristina Kirchner said her government wants to reach a settlement with a small group of creditors suing to collect on defaulted debt, but only if U.S. courts create the right conditions for talks.

Let me translate this into plain English: Cristina’s saying that she’ll not abide by the terms of the contract upheld by the SCOTUS, but instead that she’ll agree to pay less when U.S. courts abide by Argentinian law, which is exactly what she’s been saying all along.

In her annual Flag Day speech, Mrs. Kirchner said Argentina would enter talks with the help of U.S. courts. “We only ask they create negotiating conditions that are just and in accordance with the Argentine constitution, laws and contracts we signed with 92.4% of our creditors,” Mrs. Kirchner said, referring to investors who accepted the restructured bonds.

There are fools out there who saw this as being conciliatory, and

The country’s restructured bonds jumped during Mrs. Kirchner’s speech on Friday, nearly wiping out their losses for the week.

These same fools probably bought some Ecuadorian bonds, too.

Inimical to Cristina’s thinking, the fact is that

Humiliating as that may be to the Argentinas of the world, no one would lend them money without contractually guaranteed recourse to a venue where the rule of law is well established.

Axel Kicillof, the economy minister,

dismissed the options of full payment or outright default as unthinkable. He said that the government would attempt to reroute its exchanged bonds from New York to Argentina, away from the reach of the United States’ courts. That would allow Argentina to continue paying the creditors it struck deals with in 2005 and 2010, without paying the holdouts.

“Transferring the bonds to local law would be very difficult at the street level,” warns Henry Weisburg at Shearman & Sterling, a law firm. First Argentina must convince a majority of holders of the exchanged bonds to agree to the swap. This task may be insurmountable given that many of the current creditors are bound by rules restricting them from holding assets under foreign jurisdiction.

Carrion trade
Even if Argentina were to succeed in persuading holders of the exchanged bonds to take the plunge, any intermediary that helped facilitate the rerouting risks being held in contempt of the New York courts. Argentina would thus need to find an intermediary that is not, and has no desire to be, subject to New York law. Lastly, Argentina would need to convince Bank of New York Mellon, its current trustee, to release information about the bondholders to its new intermediary. That could put the bank into contempt; it has already said it “will comply with any court order by which it is deemed bound.”

The Hedge Funds Aren’t Crying for Argentina, but they’d be wise to hold off the celebration until they actually get paid:

The offer to negotiate comes less than two weeks before Argentina has to make the next interest payment on its restructured bonds, which U.S. courts have said the country isn’t allowed to pay unless it also pays the holdout creditors. If Argentina misses the interest payment on June 30, the country sinks into technical default and will have another 30-day grace period to avoid an outright default.

In other LatAm debt stories, Guatemalan bonds are looking bad, too.

Sing it, guys,

June 16, 2014 By Fausta

Argentina: SCOTUS rules for the creditors

Two, not one, rulings regarding the 2001 defaulted bonds, upholding U.S. contract law; As I had mentioned earlier,

This is an interesting case, not just because Argentina initially had to issue the bonds with a guarantee that they would pay them in full because the country had already defaulted, but also because it may set a precedent for any future sovereign debt or municipal debt restructurings.

High Court Sides With Holdout Creditors in Argentina Debt Case
The U.S. Supreme Court handed Argentina a pair of legal setbacks in cases stemming from its 2001 default, a major blow for the country in its lengthy battle with holdout creditors
The first,

In one highly anticipated case, the justices rejected Argentina’s request that the high court intervene in litigation with holdout hedge funds that had refused to accept the country’s debt-restructuring offers.

The Supreme Court, without comment, left in place a lower-court ruling that said Argentina can’t make payments on its restructured debt unless it also pays the holdouts.

And then there’s the disclosure case,

In a second related case, the high court ruled that bank records about Argentina’s international assets can be made available to one holdout creditor seeking to collect on court judgments stemming from the default.

To add to the double whammy, the decision was 7 to 1; Lyle Denniston of SCOTUS blog explains,

Besides refusing to hear Argentina’s plea that U.S. courts had no authority to command how it, as a sovereign nation, deals with holders of its external debt, the Court silently turned aside a plea by Argentina to get an interpretation by New York state courts of just what legal obligations of equal treatment Argentina has undertaken in selling the now-defaulted bonds.

In contrast to the simple denial of those issues, the Court issued a full-dress opinion on the separate question of how wide an opportunity the holders of defaulted bonds would have to gather information from two banks about the location of Argentina’s financial assets overseas.

In an opinion by Justice Antonin Scalia, the Court rejected Argentina’s argument that those bondholders could only seek information about assets that that country keeps in the United States. Argentina had relied upon a 1976 U.S. law seeking to insulate foreign governments from some legal obligations in U.S. courts.

For one thing, Justice Scalia noted, Argentina had given up its immunity to demands for information about its assets that could be used to cover its obligations on debts. But, in addition, Scalia wrote, the 1976 law on foreign immunity simply says nothing at all about giving foreign governments immunity to demands that they produce information that may be necessary to satisfy a debt obligation they had undertaken.

This means the investors can get access to a wide number of bank records to locate financial assets overseas that they might be able to seize as compensation.

Argentina had sent a delegation to meet with Nancy Pelosi last week to discuss the debt,

Hours earlier, the Argentine delegation had lunch with former US solicitor-general Paul Clement — a legal adviser for the Argentine position against the hedge funds that have refused to restructure the country’s defaulted debt — and representatives from the Cleary, Gottlieb, Steen & Hamilton law firm.

Justice Sotomayor had recused herself.

You can read the decision in full here.

Argentina’s bond drama: pathway to peace or a new Falklands?

Argentina Loses US Supreme Court Appeal In Key Hedge Fund Case, Now In Its 12th Year

Cristina Fernández will address the nation on television at 9 pm local time tonight.

April 23, 2014 By Fausta

Argentina: SCOTUS hearing Republic of Argentina v. NML Capital

As previously mentioned, the Supreme Court is hearing arguments on the defaulted debt case, Republic of Argentina v. NML Capital. NML is trying to collect $1.6 billion in judgments it has won in U.S. court cases against Argentina.

The justices were skeptical:

Argentina got a skeptical reception at the U.S. Supreme Court as the justices considered whether two banks must turn over details about the country’s assets as part of a multibillion-dollar fight over defaulted government bonds.
. . .
The bondholders’ attorney, Theodore Olson, told the justices that Argentina, when it issued the bonds, agreed to submit to the jurisdiction of U.S. courts. Had it not done so, “it never would have been able to borrow any money in the United States,” Olson said.

However, there’s The problem when a pitfall opens

The Supreme Court spent most of a half-hour on Monday staying entirely away from a pitfall in the law that governs debt collection, but then that trap suddenly opened widely, and nearly swallowed the case of Republic of Argentina v. NML Capital Ltd. What made the difference? The Court began worrying a lot about the identity of the debtor — the sovereign nation of Argentina.

To a remarkable extent, this was an argument in which the front half and the second half did not seem to be on the same page. In the end, though, it appeared that the second part might well turn out to be controlling, and Argentina could get some special treatment as a debtor — because it is a nation, not an ordinary debtor.

Read the rest of Lyle Denniston’s post here.