Bonds & Peso Slide As Fernandez Slams Holdouts For "True Aggression Against Argentina"

With hours to go until Argentina's grace period runs out and default occurs, investors are less than frantically selling Argentine bonds and pesos. They are lower but do not appear in full panic mode as we presume investors cling to hope that Argentina folds and pays off the holdouts (though there has been no sign of that so far). ARG 2033 bonds are down 3 points to 81 and the black-market peso is modestly weaker at 13.0 (near its record lows). Argentine CDS tightened modestly (as BofA warns the facts surrounding Argentina’s bond payments continue to be unique and deciding if CDS are triggered could take longer than expected) but 1Y CDS are holding at 4600bps (equivalent) - a 52% probability of default. Paul singer continues to defend himself (and the holdouts) from claims they are "dangerous fundamentalists" hell-bent on making it impossible for foreign sovereigns to restructure their debts.

Bonds are dropping but not in panic mode yet as CDS are priced for around a 52% probability of default.

 

Argentine President Cristine Fernandez speaks:

  • *ARGENTINA HAS PAID DEBT ON TIME WITHOUT MARKET ACCESS:FERNANDEZ
  • *ARGENTINE DEBT-TO-GDP RATIO AMONG LOWEST IN WORLD: FERNANDEZ
  • *HOLDOUTS UNDERTAKING TRUE AGRESSION AGAINST ARGENTINA:FERNANDEZ
  • *FERNANDEZ SAYS JUDGE GRIESA HASN'T BEEN NEUTRAL IN BOND CASE
  • *ARGENTINA REITERATES WILL TO PAY 100% OF CREDITORS: FERNANDEZ
  • *FERNANDEZ SAYS HOLDOUTS SHOULD ACCEPT PREVIOUS SWAP TERMS

But Elliott's Paul Singer defends himself and the holdouts...

As of this writing, the U.S. Supreme Court’s final rulings on two cases pitting our subsidiary, NML Capital, against Argentina have generated more than 500 news articles. In addition to provoking an endless array of bad plays on the phrase, “Don’t cry for me, Argentina,” the flood of coverage has occasioned quite a bit of commentary about Elliott. According to some, we are a positive force in the markets, because “credit markets function better when the rule of law is upheld” (New York Times, June 26). According to others, we are “dangerous fundamentalists” hell-bent on making it impossible for foreign sovereigns to restructure their debts (Foreign Affairs, June 24).

 

Elliott does not seek such publicity. Obviously, our lives would be easier if the press cared less about this particular position and/or similar positions that attract attention. The Economist ran a piece rebutting the silly and hyperbolic claim that our case will encourage lots of other investors to follow our lead, dryly noting that “There are easier ways to make money.” We think most other investors would certainly agree. As we have noted, one of the reasons that we continue to see attractive opportunities, even in the current yield-hungry environment, is that complex, labor-intensive situations are not everyone’s cup of tea.

 

While many journalists and commentators often badly misunderstand what Elliott is all about, we understand that this publicity is occasionally the cost of adhering to our philosophy, which is to seek truly uncorrelated positions in which the key determinants of unlocking value are our own creativity and hard work. Once we are in these positions, we see them through and try to achieve the best return possible. That commitment is especially strong when we indisputably have the rule of law on our side.

 

More than once during the Argentina saga, we have been erroneously described as a fund that goes out of its way to seek out litigation. That description is false – litigation is uncertain, expensive, difficult and time-consuming. It is a last resort to which we only turn when a dispute becomes impossible to resolve through negotiations, as has been the case for many years with respect to Argentina due to the Argentine government’s refusal to negotiate with us. However, if we must litigate in the course of enforcing our contractual rights, then we will not shy away from it. And if publicity is also a part of that equation, then so be it.

The IMF just gave Argentina the kiss of death...

  • *IMF SEES NO BROAD CONSEQUENCES OF ARGENTINA POTENTIAL DEFAULT

As BofA warns this may not be simple

  • *DETERMINING ARGENTINE CDS CREDIT EVENT WOULD BE LENGTHY: BOFA
  • *DEFINING EVENT OF A DEFAULT FOR ARGENTINA NOT CLEAR-CUT: BOFA

Determining whether Argentina’s failure to reach a settlement with holdout creditors tomorrow will trigger a default on bonds and credit-default swaps isn’t clear cut, according to Bank of America Corp.

“To make the determination on whether a default had occurred, a process that would normally take around a day, could take much longer,” Jane Brauer, a New York-based strategist at the bank, wrote. “We expect that Argentina will continue to claim that it paid in full and on time, even though it was fully aware, at the time of deposit, that the recipient trustee would likely hold the funds.