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Bond investors who think Argentina’s decade-long battle over its defaulted debt will end when a new government takes over will probably be disappointed once more, according to Elliott Management’s Jay Newman, Bloomberg News reported yesterday. Argentina’s international dollar bonds have gained 25 percent in the past year, the most in emerging markets, according to JPMorgan Chase & Co.’s EMBI Global Diversified indexes. Investors are speculating that a regime change after the October presidential elections will improve the country’s economic imbalances and that the new administration will settle with holdout creditors. The South American nation’s sale of $1.4 billion of bonds governed by local law on April 21 was a loss for everyone involved, Newman said. Argentina paid 8.96 percent, or almost double the borrowing costs of its neighbors, while holders of defaulted debt suffered “because we’re not a step close to negotiation,” Newman said. Investors in the country’s bonds sold in the 2005 and 2010 debt swaps also lost out because Economy Minister Axel Kicillof “is happy to leave their bonds in default,” Newman said. Argentina sold the 2024 bonds in the local market as litigation with creditors led by billionaire Elliott Management prevented the country from servicing international bonds without also paying defaulted debt, something which it refuses to do.

Puerto Rico’s power utility disagrees with a proposal from bondholders to modernize the agency and fix its finances as a contract between the parties is set to expire at month-end, Bloomberg News reported on Friday. The bondholder plan to upgrade the utility’s infrastructure to lower fuel expenses would raise costs by about $3.1 billion over nine years, the agency said in an executive summary on Thursday. Lisa Donahue, chief restructuring officer for Prepa, has said that the investors’ plan may be premature in assuming full repayment of the agency’s $8.6 billion of municipal bonds and fails to meet environmental standards. “A successful restructuring of Prepa must be based on an executable plan that rightly balances the contribution of Prepa’s” creditors, customers and bond insurers, according to the executive summary. Prepa will release a restructuring plan this summer, Donahue told a commonwealth Senate committee last week.

The U.S. judge overseeing a dispute between Argentina and holders of its defaulted debt said investors led by Paul Singer’s NML Capital are entitled to information about Tuesday’s $1.4 billion bond offering by the South American nation, but didn't order disclosure just yet, Bloomberg News reported yesterday. U.S. District Judge Thomas Griesa yesterday rejected NML’s request that Argentina and two banks that bought the bonds — Deutsche Bank AG and Banco Bilbao Vizcaya Argentaria SA — produce details of the sale by today. He directed the parties to try to reach agreement on getting the information to NML. NML wants to try to identify Argentine assets that can be attached to pay judgments against the country stemming from its 2001 default on $95 billion in debt, the hedge fund’s lawyer, Robert Cohen, told Griesa in an hour-long hearing in Manhattan. Jonathan Blackman, a lawyer for Argentina, told Griesa that the Tuesday bond sale was a “purely internal, domestic Argentine debt offering of the kind Argentina has done for many years.” The debt was offered only in Argentina and isn’t subject to Griesa’s orders, he said.

Hedge funds Aurelius Capital Management LP and Alden Global Capital LLC objected to efforts by the bankrupt Brazilian construction company OAS SA to halt lawsuits against it in the U.S., Bloomberg News reported on Friday. OAS, which filed for court protection in Sao Paulo last month, is among more than 20 companies that have been banned from bidding on new projects with Brazilian state oil producer Petroleo Brasileiro SA amid an investigation into whether executives received bribes in exchange for work contracts. OAS, which has 9.2 billion reais ($3 billion) in debt, said that it needs court protection in the U.S. to avoid disruptions to its operations and Brazilian restructuring. The hedge funds Friday told a U.S. bankruptcy court the company shouldn’t be granted immediate relief. OAS this month sought protection from creditor actions under chapter 15 of the Code, though the company must show that Brazil is home to the principal bankruptcy and that creditors’ rights are adequately honored under that country’s law. Read more.

For further analysis of chapter 15 proceedings, be sure to pick up a copy of ABI’s latest title, Chapter 15 for Foreign Debtors. 

Argentina asked a U.S. judge to separately consider a group of eight class actions filed by holders of the country’s defaulted debt from another set of cases including claims by hedge funds, Bloomberg News reported yesterday. Carmine Boccuzzi, a lawyer for Argentina, asked U.S. District Judge Thomas Griesa yesterday to reject a request by lawyers for the investor classes to consider their cases along with dozens of what are known in the bond dispute as me-too cases. Those include lawsuits by hedge funds that bought the debt at a discount after Argentina’s 2001 default. Both groups of investors are seeking the benefit of Judge Griesa’s rulings blocking Argentina from paying holders of its restructured debt until it pays $1.7 billion owed to a group led by Paul Singer’s NML Capital.

Argentina’s economy minister said that Citigroup Inc.’s local unit is violating the country’s laws by signing a private accord with hedge fund NML Capital and U.S. District Judge Thomas Griesa without consulting the nation, Bloomberg News reported yesterday. The agreement, announced on March 22 by Citigroup, undermines the government's position because it doesn’t create a clear path for holders of the country’s bonds covered by local law to get paid, Economy Minister Axel Kicillof said. While it allows Citibank to fulfill its obligations as custodian of the debt by passing along payments to other financial institutions in March and June, that money is unlikely to ever make it to bondholders, Kicillof said.