A U.S. judge has ordered Argentina and investors who did not participate in the country's past debt restructurings to meet "continuously" with a court-appointed mediator until a settlement is reached, warning of the threat of a new default, Reuters reported yesterday. U.S. District Judge Thomas Griesa told Argentina, and lawyers for investors who declined to restructure their bonds after the country defaulted on about $100 billion in 2002, that time was running out to reach a deal and avert a fresh default. The parties were ordered to meet with a New York lawyer appointed to oversee settlement talks "continuously until a settlement is reached." A meeting is scheduled for 10 a.m. ET today. At Tuesday's hearing, Argentina renewed its request that the judge stay the enforcement of his orders. Judge Griesa said that this step was not necessary and that there are "ways to do something to avoid default."
Momentum is building toward a deal that would make painful losses inevitable for investors holding about $20 billion in bonds issued by Puerto Rico's highway, water and electricity authorities, even as some big U.S. mutual funds launch a legal battle to squelch a new law that authorizes a restructuring, Reuters reported today. The Puerto Rican government and most of its creditors have hired U.S.-based bankruptcy experts to advise them through the Caribbean island’s efforts to solve its debt problem, and the resolution figures look a lot like a U.S.-style bankruptcy.
Argentina is set to default in less than two weeks unless it reaches a deal with holders of defaulted bonds or U.S. courts grant a delay to allow the nation to continue servicing restructured bonds, Bloomberg reported yesterday. U.S. Judge Thomas Griesa blocked the country’s attempt to make a June 30 bond payment, saying that it must also comply with an order to pay $1.5 billion to hedge funds and other holders of defaulted bonds that sued for full repayment. As the 30-day grace period winds down, the three possible outcomes are: (1) Argentina and holdout creditors reach a deal by July 30; (2) the court issues a stay on the ruling as negotiations continue; or (3) Argentina cannot reach a deal and the court does not grant a stay. If Argentina defaults, economic growth will slow and dollar outflows will rise.
Efforts to cap the amount of interest due to U.S. bondholders of Nortel Networks Ltd. are a "blatant attempt" to "subvert" the priority of debtholders in bankruptcy cases, Nortel's U.S. bondholders argue in new legal filings, Dow Jones Daily Bankruptcy Review reported today. Canada's Globe and Mail reported an ad hoc group of U.S. bondholders and debenture trustees filed court submissions on Tuesday, arguing that they deserve to be paid the contractual amount of interest that has accrued on $4.1 billion (U.S.) of outstanding bonds since Nortel filed for bankruptcy protection in 2009 — an amount estimated to be worth $1.6 billion and climbing.
Argentina creditors asked a U.S. judge to allow intermediaries to identify restructured debt holders, so the South American nation can seek their waiver of a clause that may scuttle any deal with holders of defaulted bonds, Bloomberg News reported yesterday. While Argentina has said that it’s seeking to negotiate with holdouts, the nation may be constrained by a “rights against future offers” clause that obliges it to extend any improved offer on defaulted bonds to holders of restructured debt. Since restructured debt holders settled for about 30 cents on the dollar, they could cite the clause to demand equal treatment if a better offer is made. Holdouts argued that the move may be a ruse to circumvent the court and pay restructured debt holders. U.S. District Judge Thomas Griesa in Manhattan last month blocked trustee Bank of New York Mellon Corp. from paying restructured bondholders $539 million it got from Argentina. The nation was barred by the judge from making those payments unless it pays defaulted bondholders in full. Judge Griesa set July 22 as the next hearing in the bond battle, when he will rule on motions by both sides just one week before restructured holders must be paid, or Argentina faces its second default in 13 years. http://www.bloomberg.com/news/2014-07-16/argentine-creditors-seek-names…
In related news, the Wall Street Journal today reported that if Argentinian President Cristina Kirchner opts to settle with two New York hedge funds that have won court-ordered awards of more than $1.5 billion, economists say that it will most certainly lead to additional claims that will cost Argentina's government about $13 billion. Kirchner and her top economic aides have fought against paying out the full value on bonds the hedge funds bought cheap, mostly after Argentina's massive 2001 default. Calling the creditors "vultures" and their demands "extortion," the Argentine government says that paying the hedge funds would open the floodgates to myriad suits costing $120 billion and drive the country into bankruptcy. But economists and former policy makers in Kirchner's government said that while Kirchner is right about Argentina facing a hefty bill, the cost is likely to be far less than what Argentine officials have claimed. And they say that the government could soften the blow by negotiating a payment schedule and offering compensation in bonds. (Subscription required.) http://online.wsj.com/articles/if-argentina-settles-debt-dispute-more-c…
Spanish wireless networks provider Gowex filed for bankruptcy yesterday, a week after an accounting fraud at the firm was revealed, while the Spanish High Court said its founder could face a jail sentence of more than 10 years, Reuters reported yesterday. Law firm Velez & Urbina said Gowex had decided to file for bankruptcy because it was in a state of "imminent insolvency" and faced a "financial standstill" after a high number of contracts were ended and new projects were cancelled. Former Chief Executive and Chairman Jenaro Garcia Martin said on July 6 that he had misrepresented the financial accounts for at least the last four years. Last week he was charged with false accounting, distortion of economic and financial information, and insider trading.
Argentine officials will meet again with a court appointed mediator in New York on Friday as the country tries to negotiate a solution to a high stakes dispute over unpaid debts, the Wall Street Journal reported today. Argentinian Economy Minister Axel Kicillof met for several hours Monday with Daniel Pollack, the lawyer that a U.S. judge named in June to oversee negotiations between Argentina and a small group of hedge funds that is suing to collect on defaulted Argentine bonds. Argentina risks defaulting again on its debt if it doesn’t cut a deal before the end of the month. During Monday's meeting, Kicillof asked that U.S. District Court Judge Thomas Griesa suspend his ruling, which bars the country from paying investors who own restructured bonds unless it also pays the hedge funds. Complying with the judge's order is "impossible," government officials said in a statement after the meeting. Last month, Judge Griesa blocked interest payments for $539 million due on Argentine bonds June 30 after the Kirchner administration deposited the funds with the bond trustee, but didn´t pay the hedge funds. Argentina has until July 30 to get that money to bondholders or run the risk of being declared in default.
In the wake of an accounting scandal at Spanish Wi-Fi provider Let's Gowex SA, cities around the world are scrambling to figure out whether deals they have with the company to create hot spots will still go ahead, the Wall Street Journal reported today. Officials in cities from Dublin to Dubai signed deals with Gowex to create hot spots or boost connectivity in parks and neighborhoods. Over the weekend, Gowex admitted to falsifying its accounts and said that it would file for bankruptcy protection. New York City's Economic Development Corp., which signed a deal for Gowex to provide 60 hot spots throughout its five boroughs, has reached out to Gowex representatives, but discussions have been inconclusive, spokesman Ian Fried said yesterday. The group has spent $185,000 of $245,000 it had allocated to a Gowex contract, he said.
A deputy central bank governor said today that China should let more ailing firms go bankrupt to help improve economic mechanisms rather than allow them to get government-led bailouts, Reuters reported yesterday. The risk of corporate failures in China is rising as economic growth slows and the government tries to put a lid on high debt levels in the economy to help ward off financial risks. "In the course of our surveys, we found that many companies are in the zombie state but they have taken up a large amount of credit," Liu Shiyu said. He urged companies in the coal, steel, machinery and shipbuilding sectors to find ways out of business difficulties, including using a bankruptcy law introduced in 2007. Local government officials generally mediate between creditors behind closed doors and Beijing has used the law cautiously, fearing that the failure of large firms and widespread layoffs could lead to social unrest. The number of bankruptcies handled by Chinese courts fell to 1,920 last year from 10,000 a few years ago, Liu added.
Argentina on Friday accused a U.S. judge of being biased in favor of hedge funds that have sued the South American country for full repayment of defaulted bonds, cementing the tough stance it has taken ahead of debt talks set for New York this week, Reuters reported on Friday. A series of rulings by U.S. District Court Judge Thomas Griesa leave Argentina just three weeks to clinch a deal with the funds before falling into another default, which would heap financial stress on its already shrinking economy. The government of President Christina Fernandez denounces the funds as vultures bent on crippling Argentina, Latin America's third largest economy, for the sake of profit. The legal fight stems from Argentina's 2002 default on about $100 billion in bonds. The financial crisis thrust millions of middle-class Argentines into poverty. The economy snapped back from 2003 to 2008 before being weighed down by high inflation and heavy-handed trade and currency controls. More than 92 percent of the country's investors agreed to receive less than 30 cents on the dollar in bond restructurings carried out in 2005 and 2010. A group of funds rebuffed those terms after buying bonds at deep discounts and sued in U.S. federal court demanding 100 cents on the dollar. They won a judgment from Griesa in 2012 for $1.3 billion, and Argentina's appeals have failed.
