Zodiac Pool Solutions SAS, a supplier of swimming pool products controlled by asset manager Carlyle Group LP, filed for U.S. bankruptcy court protection seeking recognition of U.K. court proceedings on its debts, Bloomberg News reported yesterday. The company listed assets of as much as $1 billion and debt of more than $1 billion in chapter 15 documents filed yesterday. Under a U.K. “scheme of arrangement,” the company will make a 145 million-euro ($194 million) payment and some debt maturities will be amended and extended. Zodiac’s creditors “voted substantially in favor” of the U.K. plan, according to U.S. court papers.
Dutch coal miner New World Resources NV filed for bankruptcy protection in a U.S. court on Wednesday while officials negotiate cuts to the roughly EUR825 million ($1.1 billion) debt owed by the company, which has struggled to profit amid depressed global coal prices, Dow Jones Daily Bankruptcy Review reported today. New World Resources, whose operating subsidiaries mine for coal in the Upper-Silesian coal basin in Czech Republic and Poland, filed for chapter 15 protection. The company filed the case to block bondholders who are unhappy with the repayment terms of a proposed restructuring plan from filing a U.S. lawsuit to stop it. A British court has already approved the proposed restructuring plan.
Argentina said that it doesn’t oppose a deal sought by JPMorgan Chase & Co. and other banks that would allow the country to resume debt payments, as its dollar bonds sank for a second day, Bloomberg News reported today. Argentina’s Economy Minister Axel Kicillof said that the government wouldn’t oppose a third-party solution to its dispute with a group of hedge funds who successfully sued the country for $1.5 billion. A U.S. judge has blocked Argentina from paying its debt — including an interest payment due July 30 on $13 billion of bonds — until the hedge funds led by Elliott Management Corp. get their money. Standard & Poor’s declared the country in default while Moody’s Investors Service placed its rating on negative outlook. Kicillof’s comments came as a group of international investment banks met with Elliott and the other so-called holdout creditors to propose buying securities they own from an earlier default in 2001. The nation was supposed to pay $539 million in interest yesterday on its bonds due in 2033. The deadline passed after two days of negotiations at a court-appointed mediator’s office in New York failed to produce a settlement with the hedge funds. Argentina can’t participate in a settlement with the hedge funds because doing so would require the country to similarly sweeten terms for the 93 percent of investors who went along with the country’s debt restructurings in 2005 and 2010, Kicillof said. Those investors got about 30 cents on the dollar. The requirement, known as the RUFO clause, could trigger claims of more than $120 billion, dwarfing the country’s $29 billion of reserves, he said. The clause is set to expire at the end of 2014. http://www.bloomberg.com/news/print/2014-07-31/argentine-bonds-halt-two…
In related news, the International Swaps and Derivatives Association (ISDA) has agreed to consider whether a credit event has occurred on Argentina's credit default swap contracts (CDS), Reuters reported yesterday. Swiss bank UBS yesterday submitted the request for ISDA's determinations committee to consider whether a "failure to pay" credit event has occurred, citing a missed deadline to deliver interest payments to exchange bondholders. ISDA's 15-member committee is expected to vote on whether a payment on Argentine CDS contracts can be triggered in the next couple of days. http://www.reuters.com/article/2014/07/31/argentina-debt-cds-idUSL2N0Q6…
U.S. regulators need flexibility in overseeing cross-border swaps, a lawyer for the Commodity Futures Trading Commission told a federal judge as he defended the agency’s reliance on guidance rather than formal rules in a lawsuit brought by Wall Street’s largest lobbying groups, Bloomberg News reported yesterday. Congress directed the CFTC to regulate overseas trading of swaps to prevent a catastrophic market failure like the one involving American International Group Inc. (AIG) in 2008, Robert Schwartz, a lawyer for the agency, said at a hearing in federal court in Washington, D.C. The CFTC didn’t want to bind itself “with inflexible rules,” Schwartz said. “The markets change all the time. They change their business practice to avoid regulation where they believe it is in their interest.” He asked U.S. District Judge Paul Friedman to dismiss the case, arguing that if swaps market participants prevail in court they would have “free rein to conduct their business overseas without consequences.” The lawsuit — also filed by the International Swaps and Derivatives Association and the Institute of International Bankers —is one of a series of Wall Street challenges to U.S. efforts to overhaul financial regulation following the worst economic collapse since the Great Depression. The trade groups represent Goldman Sachs Group Inc., Deutsche Bank AG, JPMorgan Chase & Co. and other swap dealers. The 2010 Dodd-Frank Act gave the CFTC power to bring swaps, which have been traded behind closed doors, under U.S. oversight for the first time.
With Standard & Poor’s saying that Argentina is in default and last-minute plans to remedy the situation falling through, investor focus is turning to whether holders of $29 billion of bonds will demand immediate repayment, Bloomberg News reported yesterday. The nation missed a deadline yesterday to pay $539 million in interest after two full days of negotiations in New York failed to produce an accord with creditors from its last default in 2001. A U.S. judge ruled that the payment couldn’t be made unless those investors, a group of hedge funds led by Elliott Management Corp., got the $1.5 billion they claimed. As Economy Minister Axel Kicillof returns to Buenos Aires with no set plans for further discussions with the hedge funds he described as “vultures,” other creditors must decide whether to invoke a clause that entitles them to demand their money back. While an 11th-hour attempt last night by a group of Argentine banks to avert a crisis by purchasing the securities from Elliott fell through, bondholders probably will give the parties more time to reach a settlement, according to Bank of America Corp.
Members of Argentina's banking association, known as Adeba, are working on a last-minute plan to help the country avoid default, the Wall Street Journal reported today. News of the plan came as Argentina's economy minister said yesterday that the country would continue negotiations today with holdout investors after failing to reach a deal during a full day of talks. Argentina needs to reach an agreement with the investors by Wednesday to prevent a default, which would be its second in 13 years. Meanwhile, Argentina's representatives and the holdout creditors met face to face for the first time yesterday, the court-appointed mediator, Daniel Pollack, said in a statement after the talks had concluded. Pollack said that Argentina and the holdouts hadn't yet determined whether and when to meet on Wednesday. The bankers association's plan, which hasn't been completely hashed out among the banks, would entail buying the legal claim and paying off the holdout creditors who are suing Argentina in U.S. courts for full payment on bonds the country defaulted on in 2001. In exchange, the banks would ask the holdouts to ask U.S. District Judge Thomas Griesa, whose ruling has barred Argentina from paying its restructured bondholders unless it pays off the holdouts, to suspend his ruling.
Holders of Argentine Euro bonds filed an emergency request that a U.S. judge halt litigation over the South American nation’s defaulted bonds, citing an agreement by some debt-holders to waive a key clause as justification to allow settlement talks extra time, Bloomberg News reported yesterday. U.S. District Judge Thomas Griesa previously ruled that the country can’t pay that debt unless it also pays more than $1.5 billion to holders of its defaulted bonds. The Euro bondholders, who aren’t involved in a suit by hedge funds led by billionaire Paul Singer’s NML Capital, said holders of more than 5.2 billion euros ($6.97 billion) of restructured bonds agreed to waive a key provision in their contracts. Argentina warned that the provision may allow those bondholders to claim billions of dollars more if it pays off defaulted bondholders such as NML, and is a major obstacle to a settlement. The Euro bondholders asked Judge Griesa for a delay of at least 90 days in enforcing his orders in hopes of “opening up a path to settlement,” one that may be more easily obtained given the waiver of the rights upon future offers clause.
Argentina could make unfortunate history this week if it defaults on its foreign debt for the second time in 13 years as a showdown with creditors comes to a head, according to an analysis in today’s Wall Street Journal. When Argentina last defaulted on this debt, in 2001, it was the biggest sovereign default ever. The seeds of the current drama were sown not long after that, when investors bought the country's defaulted bonds but never accepted its terms for restructuring the debt. Now they are standing in the way of payouts that would avoid a default this week. Although there is little fear of contagion for other emerging markets and minimal concern Argentina would suffer the kind of economic implosion of 13 years ago, a default still could cost one of Latin America's biggest economies dearly, keeping it shut out of international credit markets and crimping credit to companies. It also could complicate the transition to a new government after next year's presidential election.
Argentine representatives have made it clear that the South American country plans to default next week, a spokesperson for Elliott Management subsidiary NML Capital said late Thursday, Reuters reported yesterday. "We will continue to seek ways to engage Argentina in negotiations, but there is currently a total lack of willingness on Argentina's part to solve this problem," NML Capital said. Representatives for holdout investors and Argentina in the country's ongoing debt default met for about three hours with a court-appointed mediator in New York on Thursday.
Argentina will keep talking to "holdout" investors who are suing the country for full payment on their bonds, but its demands should not be trivialized as whims, Reuters reported yesterday. President Cristina Fernandez said that Argentine officials would travel as often as necessary to New York, where negotiations aimed at staving off another painful debt default are being held through a court-appointed mediator. The latest round of debt talks between the two sides was pushed back by a day on Wednesday, mediator Daniel Pollack said, as the clock continued to tick toward a July 30 deadline for a deal. Pollack said that the meeting had been rescheduled for 12 p.m. EDT today. Fernandez's unflinching stance in the battle against "holdout" investors suing the country may increase the odds that her government will default, and the judge blocked transferring the funds to creditors, triggering a 30-day grace period that expires July 30.
