Another Wait and See

ARGENTINA - In Brief 29 Sep 2014 by Esteban Fernández Medrano

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Last Friday, during the hearing between Citi Bank and Holdouts regarding whether debt instruments issued under Argentine law are within reach of Griesa’s “pari pasu" interpretation, the judge decided to postpone the definitive resolution and implement a temporary stay to allow holdouts to present more arguments in 30 days. This allows the Argentine branch of Citi Bank and other financial institutions to pay the Par bonds issued under Argentine law, whose coupons are due tomorrow. Par bonds issued under non Argentine law on the other hand remain under Griesas payment prohibition (prohibiting coupon payments of restructured debt before Argentina honors full payment to Holdouts.). Even though non US investors, particularly European, might try to get payment through the new local payment entity (Banco Nación Fideicomiso). Tomorrows Par coupons payments are: USD 84mn (of which 67 are under US law and the remaining under Argentine law), approximately Euros 74mn and AR$ 40mn While local press presented this stay as a partial victory for Argentina, the delay in defining what sounds like common sense (i.e. that non-US debt instruments should not be affected by US debt placement regulations), is a costly drawback for the government’s debt strategy. It does not yet allow US investors to consider the possibility of buying debt issued under Argentine jurisdiction as an alternative to the “embargoed” US debt instruments. This is a component of the government’s legal strategy to overcome the dead-end instrumented by Griesa’s request to negotiating with Holdouts before the expiration of the RUFO clause. It would also give the government some minimal bargaining power, rather than havin...