Elliott Management Vs Argentina Round 3: The Showdown

Tyler Durden's picture

Most recently, in "Elliott Management Vs Argentina Round 2: Now It's Personal" we laid out the story of how in the ongoing legal fight between Argentina's prominent distressed debt creditor, and exchange offer holdout, Elliott Management (and to a smaller degree Aurelius), and distressed debtor Argentina, the moving pieces continue in flux, even as various US legal institutions have demanded that Argentina proceed with paying the holdouts despite the Latin American country's vocal prior refusals to do so, and most importantly, the lack of a sovereign payment enforcement mechanism. Last night, the fight escalate one more, and perhaps final time, before the Rubicon is crossed and Argentina either pays Elliott, "or else" the country proves all those who furiously bought up Argentina CDS in the past two weeks correct, and the country redefaults on $24 billion of debt. Because as Reuters reports, late last night, US District Judge Griesa overseeing the Argentina case, ordered the Latin American country to make immediate payment with a deadline for escrow account funding of December 15.

In an ruling delivered just as the United States headed off for its Thursday Thanksgiving holiday, U.S. District Judge Thomas Griesa rejected Argentina's request to maintain his previous order halting payments to holdout investors who did not participate in two bond exchanges of defaulted sovereign debt.


The ruling is the latest development in a litigation saga that has lasted more than ten years and now appears to be favoring holdout bond investors such as Elliot Management Corp's NML Capital Ltd and Aurelius Capital Management.


If Griesa's ruling is upheld and Argentina chooses to defy him, U.S. courts could ultimately inhibit debt payments to creditors who accepted the terms of the restructuring, out of consideration for investors who rejected Argentina's terms at the time.


This would trigger a technical default on approximately $24 billion worth of debt issued in the 2005 and 2010 exchanges.

Griesa essentially circumvented the traditional appeals process and said no more delays.

Griesa wrote that he would ordinarily leave his order in place pending a ruling from the 2nd Circuit. However, he concluded this was not possible given comments from Argentine officials, including President Cristina Kirchner, that Argentina would not pay anything to the holdout bondholders.


"It is the view of the District Court that these threats of defiance cannot go unheeded, and that action is called for," Griesa wrote, saying the payments should be made as soon as possible.


The 2nd Circuit already upheld Griesa's Feb. 23, 2012 decision that Argentina violated equal-treatment provisions for all creditors when it chose to pay exchange bondholders and not holdout bondholders.


Given that Griesa's latest decision still needs the final blessing of the 2nd Circuit, he ordered that rather than Argentina paying the plaintiffs directly, it should deposit the money in an escrow account by Dec. 15.


In his ruling, Griesa said the less time Argentina was given "to devise means for evasion, the more assurance there is against such evasion."


"There is no question about what is 'currently due' to plaintiffs," Griesa wrote. "The amount that is currently due is the amount of the unpaid principal, the due date of which has been accelerated, and accrued interest."

The ball is now in Argentina's court. As a reminder, Argentina made it quite clear it would not pay "one dollar to the vulture funds." The vulture funds in question, are Elliott Management and Aurelius, who are owed upward of $1.3 billion. "Argentina owes this and owes it now," Griesa said. "It should be emphasized that these are debts currently owed, not debts spaced out over future periods of time." Griesa said NML and Aurelius should be paid concurrently or ahead of exchange bondholders.

And with the coupon payment due in one month, when Argentina has to pay $3.14 billion in accrued interest, we will know in a matter of weeks whether a district court's harsh language in New York is enough to make a Treasurer in Buenos Aires shiver in fear. Somehow we doubt it. Which also means Naval Commodore of His Own Majesty's Navy Paul Singer Second Rank will soon be upgraded to First Rank once he privateers a few Argentinian subs and perhaps an aircraft carrier... if any were still in service of course.

Without going into details (read Subordination 101 for the full primer), Griesa basically crushed any hopes the exchanging bondholders had that they had received priority status by being fooled into the exchange offer and accepting a price of 30 cents on the dollar:

Griesa rejected arguments from exchange bondholders that full payment to NML and Aurelius would infringe on their rights.


"In accepting the exchange offers of thirty cents on the dollar, the exchange bondholders bargained for certainty and the avoidance of the burden and risk of litigating," he wrote.


"Moreover, it is hardly an injustice to have legal rulings which, at long last, mean that Argentina must pay the debts which it owes. After ten years of litigation this is a just result," the judge said.

What is most interesting is that Griesa for the first time threatened not only Argentina but its "accomplices" i.e., funds transferring "third party" banks, with enforcement should they selectively wire funds to one group of bondholders, but not another - the hold outs.

The 2nd Circuit has also directed Griesa to spell out precisely how his injunctions would apply to third-party banks.


Among the banks is BNY Mellon, which transfers funds from Argentina to the country's bondholders. It argues that the injunction would interfere with its duties to the exchange bondholders and could cause a wider disruption to the largely automated international bank payment systems.


Griesa said BNY Mellon's arguments "miss the point" and if Argentina followed the appeals court ruling there would be "no problem" about the money ending up in the right accounts.


He said that if Argentina attempted to make payments to the exchange bondholders in violation of the court's rulings, third party institutions should be "held responsible" for ensuring they are not taking steps to violate the law.

Of course, BNY has the choice to just pull out and do no more business with Argentina and its creditors. There is always the option that creditors can come in on location in Buenos Aires and collect their interest in bags with dollars signs printed on them. Or just pull an Iran, and demand payment in gold via unsupervised gold transfer pathways, such as Turkey.... or China. If and when such a circumventing route is discovered, it will be one more chip away in the dollar's reserve status.

Finally, should Argentina not make the payment in December as loudly cautioned by Griesa, wait and see just why Elliott happens to be on the ISDA determinations committee. We anticipate that ISDA will find an Argentinia event of default will have occurred within seconds of the December coupon non-payment as the country follows Hostess into Chapter 22, only this time it is really personal between Argentina and some of the wealthiest hedge funds in the world.

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EscapeKey's picture

Countdown until the US "exports democracy" to Argentina.

GetZeeGold's picture



Might want to send our ambassador back home for say a week or two.....or send a couple seals in for support.

BidnessMan's picture

The two SEALs worked out great in Benghazi not long ago ....

AllWorkedUp's picture


"The two SEALs worked out great in Benghazi not long ago ...."

WTF does that mean?

They did their jobs while the fuckbag White House, CIA chief, Admirals and Generals stood down and watched.


old naughty's picture

Did they real-ly?

You know that for a fact, no conspiracy?

BidnessMan's picture

To the extent you can believe mainstream media, and with a couple of generals getting fired for trying to send in some support to the SEALs in Benghazi, I do believe that is a fact.  The White House won't release tapes of the Situation Room that night.  Seems very clear the White House and CIA sat back, watched, and let it happen.  And actively prevented the military from providing support to the  Ambassador and SEALs.  And then doctored up the press briefings to cut out the part where they all knew it was a terrorist attack within 24 hours.  And then called anyone calling out Susan Rice for lying a rascist.  Open your eyes and look around.... Joseph Goebbels would have been proud of the propoganda effort going on.

BidnessMan's picture

Having two SEALs - with no backup and no support from the White House and CIA, and with the military forced to stand down and watch -- did not work out great in Behghazi.  Let's not recommend that again.  

slaughterer's picture

Time for Lagarde to throw a gold-filled Hermes bag from Fort Knox to the Argentinians (that is, to Elliot).   That is the way to keep it in the family:  in the end, US taxpayer money will go to a US hedge fund--even if it must pass through a few exotic locations unless Elliot want to start their own Navy or cocaine running operation, lulz.

jcamargo's picture

Actually the US is importing democracy from South America: Obama. We know very well the script.

jeff montanye's picture

excellent point.  we are importing the police state characterized by many south american nations historically, although they seem to be improving over the last few decades while we regress. 

rant: this change you wanted to believe in agent, this master of reform, this nobel peace prize winner, this constitutional law professor has made bipartisan the worst transgressions of g.w. bush (wire tapping without warrant, imprisonment without charge or trial, aggressive war, torture) and to it added the killing of citizens and non citizens, their wives, children, neighbors, first responders, mourners and the unlucky, far from a battlefield, without indictment, warrant or appeal by bloodless (to the killers) video game-like remote control.

a nation ruled by men not laws.  what the constitution was to avoid.

BullionBoy's picture


Why is this even in a U.S. court?  The U.S. makes a mockery of itself.


Does the judge realize that the chances that the U.S. can repay its debt are exaclty zero?  Does the judge realize that his chances of collecting his own retirement are exactly zero?


This is why the whole world is laughing at the U.S. more and more every day.


There is no legal or financial system on the planet less workable or more over-run by fraud than the U.S. yet we insist on continuing to tell everyone else what to do.


That was ok when we thought we had little to no corruption but now that it's clear that the apple is rotton to the core it's COMPLETLEY RIDICULOUS!


Who is a U.S. court to say what Argentina will pay?  Argentina says they won't pay and Argentina has the same status as the U.S. -- that status is nation state.


How one impounds a naval vessel without getting shot at is another matter entirely and one that I find baffling.  I suspect that is the lesson that nation states will take away from this one is don't let no one take your crap without extracting a heavy toll then and there.


ptoemmes's picture

So, tell me exactly how the US taxpayer may end up footing the bill on this?  You know it could happen.

Seize Mars's picture

You're damn right it will. Just like the Madoff investors.

Seize Mars's picture

Yeah, time to send Smedley Butler. You know, the "high class enforcer."

The one with all the brave words. After he did the killing.

rsnoble's picture

Well what other choice does Argentina have?  Collapse and have everything sold off to the highest bidder like Greece?  Fuck em, I hope Argentina breaks it off in their ass!

Paladin en passant's picture

I guess we can assume you're a deadbeat borrower yourself.  All smiles and promises when you take the money on Monday and cussing out your lender as the world's worst asshole on Tuesday when the bill comes due.  I'm also guessing your relatives avoid you on holidays, tired of being hit up for money or pissed you've never repaid what you borrowed already.  Human nature never changes.

clagr's picture

as SoupySales famously said:

Don't lend to people--it gives them amnesia!

gmrpeabody's picture

Ouch..., that's gonna leave a mark!

AurorusBorealus's picture

Since the ad hominem barrier has been broken.  I will simply say that you are an idiot.  The people of Argentina and the current government did not borrow this money: a defaulted government did.  Why should Argentines today and the current government have any responsibility to pay the debts of a former regime?  It is very different than not paying back the money you borrowed for your house.  Do you owe the money that your parents borrowed for their house?  Your neigbors?  Some guy down the way 15 years ago?  Are these your debts?  If not, why the hell is this debt the debt of the current Argentine government and the people who live here today... yes I live here... and did not borrow 1 penny of that money because I did not live in Argentina what the debt was accrued... understand?

gmrpeabody's picture

Yes, we understand. Don't offer bonds ever again, cause you'll just try to wipe the slate clean after the next election.

couvrot's picture

Great. So you borrow $100 Billion, vote in a New Government .... et voila! No moré debt.

You are funny.

msamour's picture

The investors were stupid enough to buy the debt in the first place. Let them take the loss. I don't invest in any markets because I am well aware it's all fraud. If I lost after investing, I wouldn't bitch about it. Neither should so called Trading Professional. And if you are a trading professional, take the loss, and shut the @$ck up.

Excursionist's picture

One of Mark Twain's many quips applies to you:  better to keep your mouth shut and be thought a fool than to speak and eliminate all doubt.

One elected regime borrows and spends on services, infrastructure, etc. for the benefit of the citizens and businesses that feed off the public sector, and an election later the debts don't really count?  Only an idiot ignorant enough to vote for the Kirchners would entertain such a notion.

No worries though..  Collagen Cristi will likely preside over a collapse soon enough, hopefully tattooing into Argentines' hides once and for all Margaret Thatcher's observation about socialism working only as long as other people's money doesn't run out.  Enjoy.

Omen IV's picture

your umbrage is is misdirected !

the lender has responsibility up front for the decision to extend the loan "before" the borrower gets the funds - his lack of primary and secondary collateral pools that are immediately actionable upon default coupled with the venue and indentures that surround the claims are all known prior to the loan grant

argentina's responsibility is to its "people" alone - short and long term - if they pay anything it's because its good for them

the banks actions in the housing bonds have proved there is no ethical standards or protocol to be observed - they commit fraud at will  - with known phony and impaired collateral sexed up with paid off bond rating agencies for AAA - once the banks committed "systemic" fraud in the housing industry they put everyone on notice its about "fuck you" standards nothing else - and more importantly, they have an obligation to pollute the system with as high a percentage of diseased paper to create an avalanche of lost value for even the prime paper so they can short the derivatives with impunity and limited risk - that is how the game is played

are you naive?...........no one owes anyone anything except fuck you, eat shit and die!



AurorusBorealus's picture

argentina's responsibility is to its "people" alone

Estoy completamente de acuerdo.  I am in complete agreement.

EscapeKey's picture

yes, because lending money is RISK FREE, and the lender does certainly not bear a responsibility to do due diligence

hell, let's just re-introduce debt slavery. you're all for it, that's a start.

BullionBoy's picture


You're the poster boy for what's wrong with what used to be America.


You're completely surrounded on every front by corruption and fraud and you can't even see it, because you're brainwashed.


In short, you're a complete moron as evidenced by your comment above.  Dummy.


Go back to watching the Sixers on TV like you're supposed to you idiot!

AurorusBorealus's picture

Argentina can basically say that this debt was accrued by a defunct regime.  Go pound salt, you New York Hedge Fund assholes.  Simple as that.

silverserfer's picture

Ponzinomics 101: "Don't try to sit in a chair before the music stops"

Eddyspain's picture



Maybe the game here from the start was not making Argentina pay....but making Argentina default (with ELL suposedly being loaded with Argentina´s CDS)

Diesel Seven's picture

One last thought for this US Thanksgiving day: a study conducted by the College of Domesticated Animal Culinary Science found the 97.64% of cats found in the homes of deceased owners fed on their owner's corpse. Enjoy your turkey and beware of your cat.

writingsonthewall's picture

2 problems

1) When other countries see that Argentina have told a hedge fund to fuck off - they might be tempted to follow the same path.

2) I was recently informed that 'no serious investor' ever buys sovereing CDS's as there is zero chance of a payout (it's always a 'restructure' of debts - never an default event) - if Singer does get the IDSA to call a default event - then the floodgates will open and questions will be asked why Argentina is a default by Grece wasn't / isn't.


I'mno fan of Argentina - but I'll take her side long before I take teh side of the nasty bastards who run these vulture funds.


The Soviet union (or rather teh collapse of it) broke LTCM - but Singer thnks his hedge fund is so powerful it can reverse this and break the sovereign nation?


Fat chance Singer.

EscapeKey's picture

The way I understand it is that the very same entities which declare credit events, are the same who underwrites them.

So fat chance of there ever being a credit event ever again.

GetZeeGold's picture



No reason to default when you can shove the piles of crap around.

SWIFT 760's picture

Viva Argentina...tell the jews in NY to eat a dick.

gmrpeabody's picture

Such phobias around here..., interesting.

phyuckyiu's picture

Oh hi Jacob Lew, that was very nice of you to take over after Tim Geithner. Now go stand in line so Benjamin Shalom Bernanke can suck the blood out of your penis with his magical saliva.

akak's picture

Don't try to flee Argentina

The truth is the banksters own you


(With apologies to Andrew Lloyd Webber and Patti LuPone)

Shevva's picture

So pay everyone or pay no one? or I'll 'cream and 'cream until I'm sick said the judge.

Be intresting when the world gives up on the dollar and just pays in gold, silver, oil and viagra.

fonzannoon's picture

Argentina should just rehypthecate the boat and lend it back to the hedge fund. Isn't it how that works?

monopoly's picture

I am starting to think that the end of all this is years away. It just goes on and on with no resolution. Anywhere. Oh well, we will just keep accumulating what we know is real. At some point the weight will be too great to hold up. 


And Happy Thanksgiving to all at Zero Hedge who bring us the truth every day. And a special thanks to Mr. Tyler Durden.