Chilean bus operator Inversiones Alsacia SA sought bankruptcy protection in a U.S. court, saying fare evasion and declining ridership have made it difficult to meet financial obligations, Bloomberg News reported yesterday. The company, Santiago’s biggest bus operator, listed assets of as much as $500 million and debt of as much as $1 billion in a chapter 11 filing yesterday. Alsacia, which missed an August $39.6 million payment on notes due in 2018, filed in New York because it has assets in the city’s banks. Its filing included a proposed debt exchange that has creditor backing.
The U.S. judge deciding how to force Argentina to obey court orders in a dispute over $1.5 billion in bond payments may want to take a look at TIG Insurance Co.’s debt-collection travails, Bloomberg News reported today. TIG sued an Argentine government-owned company in Chicago federal court in 2000 claiming about $4.2 million and won. The insurance company pursued that debt for more than a decade in court, arbitration, Congress and the New Hampshire legislature, through the administrations of Presidents George W. Bush and Barack Obama and with Argentina’s embassy in Washington, D.C. It hasn’t seen a dime of the money, now $29 million including interest, attorney fees and a $4,000-a-day sanction for violating a court order. TIG’s attempts to collect from what one court panel called “a uniquely recalcitrant debtor” illustrate the pitfalls U.S. District Judge Thomas Griesa faces in the bonds case in trying to force a sovereign nation to comply with his orders when it’s determined to resist. “There’s almost no effective means for the judge to enforce whatever fine he may impose,” said Mark Weidemaier, a professor at the University of North Carolina School of Law. “The practical effect of a fine would be very limited.” Judge Griesa, the Manhattan federal judge overseeing lawsuits tied to Argentina’s 2001 foreign debt default, barred the nation from paying its performing debt without also paying more than $1.5 billion owed to a group of investors led by NML Capital, a unit of Paul Singer’s Elliott Management Corp., and Aurelius Capital Management LP. Griesa found the nation in contempt of court Sept. 29 for trying to circumvent the ruling through a plan to pay bondholders locally, outside the reach of his court. The judge is considering the hedge funds’ request to fine Argentina $50,000 a day until it complies.
A Canadian court yesterday said that it would approve U.S. Steel Corp's debtor-in-possession (DIP) financing facility for the company's Canadian unit, Reuters reported. Not all parties and creditors that had raised objections to the structure of the DIP facility have consented, but they have opted not to object in the interest of the stability of the company's operations in Canada, the Ontario court heard.
U.S. District Judge Thomas Griesa ruled that Argentina must reverse steps it’s taken to replace Bank of New York Mellon Corp. with a government-owned bank unit as trustee for the nation’s restructured debt to escape a contempt-of-court finding, Bloomberg News reported yesterday. Judge Griesa said that Argentina can escape his Sept. 29 contempt ruling only if it reaffirms BNY Mellon’s role as trustee under the bond agreements and withdraws its authorization for Nacion Fideicomisos SA to act in that role. Griesa’s order, made public yesterday, said Argentina must “reverse entirely” the steps it has taken in violation of his orders, including the attempt to change trustees. Argentina must also comply fully with the judge’s February 2012 order barring the nation from making payments on its restructured debt before paying more than $1.5 billion owed to holders of its defaulted bonds, he said.
Argentina's central bank chief resigned yesterday after a long tussle with the economy minister and was replaced with a regulator seen as sympathetic to the interventionist stance of a government fighting one of the world's highest inflation rates, Reuters reported yesterday. Juan Carlos Fabrega had argued for tighter anti-inflation policies and opposed the government's heavy fiscal spending, but ran up against the powerful economy minister, Axel Kicillof, who pushed to boost growth in the stagnating economy. Alejandro Vanoli, head of Argentina's markets regulator, will take over as the central bank chief, a spokesman for leftist President Cristina Fernandez said. Fernandez has scaled up her interventionist policies in Latin America's No. 3 economy since it defaulted on its foreign debt in July, intensifying capital flight and piling pressure on shrinking foreign reserves and the peso currency.
U.S. District Judge Thomas Griesa yesterday held Argentina in contempt of court, saying that the republic was trying to find ways to circumvent a prior order requiring it pay holdout bondholders at the same time as other creditors who restructured their debt in recent years, Reuters reported yesterday. Judge Griesa deferred a decision on imposing sanctions against Argentina to a later date. But he did say that the "problem is that the republic of Argentina has been and is now taking steps in an attempt to evade critical parts of" his injunction. Argentina's government enacted a new law recently to get around a court ruling saying that it must pay more than $1.3 billion to holdout hedge funds who rejected the country's debt restructuring agreements in 2005 and 2010. The country defaulted on more than $100 billion in debt more than a decade ago.
Nortel Networks Corp. bondholders and pensioners made their final pleas to judges in Canada and the U.S. about how to divide more than $7 billion in cash the company raised by liquidating assets, Bloomberg News reported yesterday. U.S. bondholders of the defunct phone maker urged the two judges to focus on legal precedents, regardless of the effect on 56,000 Nortel retirees in Canada and the U.K. The pensioners, who are fighting each other as well as the bondholders, asked the judges to impose a fair division that avoids the “extreme outcome” of paying 11 percent on some retiree claims and more than 100 percent to some U.S. investors. With their courtrooms linked by video, Bankruptcy Judge Kevin Gross in Wilmington, Delaware, and Frank Newbould, a judge on the Ontario Superior Court of Justice in Toronto held a three-day joint hearing. They will rule separately on how to divide the money. Judges Gross and Newbould asked the lawyers whether any parties would object if the judges decide to talk to each other about the case. Under Canadian and U.S. law, they are required to reach independent decisions.
Phones 4u Ltd.’s administrator said that it will close 362 stores and cut almost 1,700 jobs as the failed U.K. mobile-phone chain sells off its assets to pay bondholders and salaries, Bloomberg News reported yesterday. PricewaterhouseCoopers LLP, which was appointed administrator last week, said the sale of an additional 198 shops and 160 concessions to former carrier partners EE Ltd., Vodafone Group Plc and retailer Dixons Carphone Plc has been approved by the courts, in a statement yesterday. The buyers will take on about 2,000 staff members.
Citibank NA asked a U.S. judge to allow it to make payments on Argentine bonds on Sept. 30, saying that they shouldn’t be subject to a 2012 court ruling prohibiting payments on the country’s exchange bonds, Bloomberg News reported yesterday. The company said in a request yesterday to U.S. District Judge Thomas Griesa that if he doesn’t allow Citibank Argentina to make the payments, it could face civil and criminal liability as well as revocation of its banking license in the South American country. Judge Griesa has said that Argentina can’t pay holders of its performing debt without also paying a group led by Paul Singer’s NML Capital that’s owed $1.5 billion on the country’s defaulted bonds. Citibank claims that the bonds on which it expects to receive the interest payment from Argentina shouldn’t be included in the order barring payment.
Citibank N.A. is set to tell an appeals court it faces “grave sanctions” from Argentina unless it defies a U.S. judge’s order blocking it from making payments to holders of $8.4 billion of the country’s bonds, Bloomberg News reported today. U.S. District Judge Thomas Griesa in Manhattan barred Citibank’s Argentina branch from forwarding a $5 million interest payment due Sept. 30 to the bondholders if the South American nation continues to refuse to make payments on its defaulted debt. If it doesn’t pay, Citibank claims, the branch and its executives face possible criminal and civil penalties, including the loss of its banking license and takeover by Argentina. “Citibank cannot comply with both of these directives — one from a United States court and one from the sovereign state in which its branch operates,” the bank, a unit of New York-based Citigroup Inc., said in a filing with the U.S. Court of Appeals in Manhattan. Griesa’s July 28 order is one in a series barring Argentina from making payments on its performing debt unless it also pays $1.5 billion to a group led by Paul Singer’s NML Capital that owns its defaulted bonds. Argentina’s refusal to make that payment triggered a July 30 default when it was blocked from making a $539 million interest payment on its restructured debt.
