With Two Weeks Left, Argentina Starts Taking (Bondholder) Names

Tyler Durden's picture

The Argentina default battle is in its final fortnight, with a July 30 grace period expiration looming, one which would result in a second bankruptcy in 13 years to formally be written down in the history books, and which could spoil the serene glow all global capital markets have found themselves in thanks to the central bankers' soothing words.

As a result, Argentina has resorted to a last ditch strategy to ferret out the full list of holdout creditors (the hedge funds led by Elliott, Aurelius and various other known and unknown bondholders) as well as get a full list of the restructured bondholders (those who are perfectly happy to clip whatever coupon Argentina will pay them instead of seeing their payment stop altogether if and when CFK announces an official default).

As Bloomberg explains, Argentina creditors asked a U.S. judge to allow intermediaries to identify restructured debtholders, so the South American nation can seek their waiver of a clause that may scuttle any deal with holders of defaulted bonds. "While Argentina has said it’s seeking to negotiate with holdouts, the nation may be constrained by a “rights against future offers”, or RAFO, clause that obliges it to extend any improved offer on defaulted bonds to holders of restructured debt."

The need for a waiver arises because the restructured debtholders, who long ago settled for about 30 cents on the dollar, could cite the clause to demand equal treatment if a better offer is made.

In reality, the real motive here is simply to get a DTC list of named, addressed counterparties. Since on June 30, Judge Griesa blocked the restructured bondholders from receiving a $539 million payment from trustee BoNY, it is the fund flow to these entities that is of concern to Argentina, as it clearly does not believe that the holdouts are entitled to a payment. However, nonpayment to the restructured bondholders would be the end of the road for Buenos Aires (if only until the next default). The problem is that Argentina does not know who they are: only BoNY does, and BoNY does not release that information. The loophole is for Argentina to get the full roster directly, something the restructured bondholders also want:

Holders of euro-denominated bonds asked Griesa to allow clearinghouses including Euroclear SA to share bondholder information with Argentina so that the “RUFO” clause may be repealed, the investors said in a filing yesterday.


“The potential triggering of the RUFO provision may be cause a chilling effect on settlement negotiations,” wrote Christopher Clark, an attorney for restructured bondholders. “It may be necessary, therefore, for Argentina to conduct a consent solicitation seeking a waiver of the RUFO provision by the exchange bondholders in advance of a potential settlement.”

And it is here that the holdouts may have been outwitted for once, because should Argentina get the names of everyone it is contractually obligated to make a payment to, it can continue to exist past July 30 assuming it makes the $539 million payment, pretending all is well. To be sure, the holdouts will have none of it: "In a letter to Griesa yesterday, holders of the defaulted bonds argued against allowing Argentina to be given bondholder information, saying it would make it easier for it to route payments to restructured bondholders outside his jurisdiction."

Which is precisely what Argentina intends to do.

So did Argentina find a last minute loophole, or will Griesa once again rule against the Latin American country? Stay tuned, as what until recently appeared an almost certainly bankruptcy, may just be avoided in the 11th hour yet again. And should CFK outwit Paul Singer yet again, we would not want to be the Argentina national football team, also known to Elliott Management simply as "collateral."

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TeamDepends's picture

Remember, Argentina means "silver land".

Comte de Saint Germain's picture

So gehen die Gauchos, die Gauchos, die gehen so. So gehen die Deutschen, die Deutschen, die gehen so.


Boris Alatovkrap's picture

Maybe after default is appropriately to rename Argentina as Zinconia after more cheap base metal.

CognacAndMencken's picture



What's interesting about the Argentine bonds is that they were issued under the jurisdiction of NY law. In other words, some "white knight" bank like Goldman made sure that if those bonds from 2001 went into default, creditors (NY banks, vulture funds and hedge funds) would have full recourse through the bought-and-paid for New York legal system. Isn't weird that Argentina issues bonds, and those bonds are issued under NY legal jurisdiction? Additionally the vulture fund NML (who owns much of the debt) is owned by Paul Singer, a close ally to Mitt Romney. 

Pacta sunt servanda

disabledvet's picture

Well that's Argentina's fault...not New York. So is Argentina's hyper inflation. So is the fact that Argentina sits on a billion tons of copper and surreal amounts of shale oil.

They do get kudos for having a real hottie for "La Duchesse" in my view. But hey, New York needs some cabbage right now...borrow the Teddy Roosevelt for a weekend and "problem solved."

I really don't see what the problem is here other than "we have been fighting against people who use human heads for their soccer ball."

Global Observer's picture

Exactly what recourse do the bondholders have under NY Law if Argentina chooses to default?

Isn't weird that Argentina issues bonds, and those bonds are issued under NY legal jurisdiction? 

It is not weird in the least. If a country's issue of bonds under its own jurisdiction doesn't attract buyers, one of the options that country has is to issue bond's under the jurisdiction of another country that attracts buyers of bonds.

nopat's picture

Except Argentina has been issuing bonds under NY jurisdiction since the mid-1970s.  Because that's what a country whose political history can be summarized as "various regimes of military juntas periodically interrupted by weakly-elected democratic governments" and have struggled to manage its economy since the end of World War I has to do in order to access the capital markets.

bescobar's picture

I dont see the big deal here. They will be bailed out by the Central banks anyway...next

WhackoWarner's picture

I will be the innocent idiot here.  WTF?  How is a foreign government not allowed access to the list of thieves?  And who in their right mind thinks some USA judge has any authority to deny this information?

Yeah I know I know.  But WTF.

CrashisOptimistic's picture

The bondholders are clients of the bank.  The bank has no reason to divulge their identities.  If someone without a warrant came to your bank and demanded to know if you have accounts there, wouldn't you prefer privacy?

disabledvet's picture

Everyone knows the Bank itself is the bondholder. Sure...there are actual investors involved...but the Jews really screwed the pooch this time and "Argentina looks like as a good place to start as any."

Besides...if we can't get the oil/gold/silver/copper/beef/attitude/etc...from Argentina the USA will be forced to team up with Columbia and take tag team Venezuela.

It's an ugly bizness...being top dog...but hey, it wasn't my idea to start a war with the Russians.

SoDamnMad's picture

Do da name FATCA mean anything to ya?

Evil Bugeyes's picture

Hey Argentina! I own $100 million in restructured bonds. You can send the payment to my bank in Nigeria.

kaiserhoff's picture

Dahn't cry for me Arhaintina....,

Cause I don't own any of your stinking shit.


dutchTender's picture

that's why i am not worried about when the u.s defaults ....  oh, you don't want to restructure ... drone strikes = problem sovled

Government needs you to pay taxes's picture

Argentina knows the drill; never fuck someone til you know their name.

disabledvet's picture

They're called "Royal Marines" for a reason.

It would be embarrassing if an entire country was successfully invaded and occupied by a bunch of sheep herders..."but there they sit."

One eyed man's picture

I think a deal will ultimately be done. If Argentina defaults, the holdout creditors lose everything, too. They are in the trade to make money, not to lose it. Serious brinksmanship here by both sides. But it will probably end in a last minute settlement.

CrashisOptimistic's picture

There is no such thing as sovereign default.

There is no international bankruptcy court that can expunge the debt.

A country can saw "we default."  The bondholders say . . . no you don't.  Pay.  The country says we default and will never pay.  The bondholders say, never leave your country or we will confiscate the airplane you fly on.  We will take the offices your UN delegation leases.

You WILL pay.  Slowly, or fast.  But you will pay.  There is no default.

THX 1178's picture

the country has a military. What do the bondhoolders have?

Ewtman's picture

It's been 13 years since Argentina defaulted and they are still mired in the U.S. legal system...



NoWayJose's picture

Judge Griesa is a jerk, and in the pockets of the reluctant bond holders - otherwise he would have let the original settlement through. He also is not an idiot, and he will see this move coming, meaning that he will block it. I smell a default with a post-default settlement - in other words - more lawyer and court time.

RhoneGSM's picture

I am confused. Did they run out of ink? 

spdrdr's picture

What will the Pope do?

nopat's picture

This isn't about some secret Jewish cabal to try and take over a South American country.  Nor is it the rape and pillage of a sovereign state at the hands of a greedy financial system.  This is a pretty simple case of Argentina backing itself legally into a corner with its bondholders and is now trying to reneg on the deal.  They fucked up and now they have to pay.  If nothing else, it speaks to the strategic leverage Elliott Management et al has in the whole escapade.  Can't help but tip my hat at them...

TrulyStupid's picture

The bondholders also fucked up by lending in the first place... it is a high risk proposition that occasionally fails. At the end of the day you can't get blood from a stone,,, so don't lend the stone any money.

nopat's picture

Bondholders are paid to take risks, which is reflected in things like the coupon/effective yield, covenants, etc.  The thing about lending to a sovereign is that, while you're right that you can't get blood from a stone, they do have taxing authority.  The calculus comes down to the risk of default against how senior you can get to that tax revenue, which considering Elliott effectively shut them out of the markets, I'd say is pretty senior.

Not sure I'd call this a fuckup on anyone's part other than Argentina's.

gcjohns1971's picture

Why would anyone loan money to a nation of Socialists (i.e. those who believe in the political and social expediency of involuntary income redistribution - ergo theft)????

Simply by holding the ideology, they are admitting they willl renege or otherwise rob you. 

It is like playing marbles with the kid in the playground who openly admits he steals marbles.  No matter who wins the game, he is going to steal your marbles.  Why would anyone want to play with him?