S.&P. Says Argentina Has Defaulted • Hacker News Board

Re: S.&P. Says Argentina Has Defaulted

#131

Post by rahimnathwani » Thu, Jul 31, 2014, 3:35 PM UTC

pessimizer wrote: post #86

blowski wrote: post #80

Earlier quoted context omitted.

I can see both sides here. What surprised me is not that a judge has decided, but that a US judge has decided. It looks like an American judge decided in an American corporation's favour, and against a poorer country, to hell with the damage it will do the world's economy. On the other hand, if the US doesn't uphold the law, then the world economy would be damaged because lending would become more unpredictable. As i…

I just edited my comment to double down due to downvotes, but this ruling will ultimately damage the US more than Argentina. If we establish that it will be impossible to restructure debt if you issue your bonds in the US, we've established that there's no reason to issue your bonds in the US. edit: it's important to keep in mind that 93% of bondholders have agreed to the restructuring. The courts look like they're s…

There _is_ reason to issue your bonds in the US (e.g. governed by New York law). Investors trust that the bond contract will be honoured because, if not, it's likely to be enforced by the courts.

Re: S.&P. Says Argentina Has Defaulted

#132

Post by the_af » Thu, Jul 31, 2014, 3:36 PM UTC

tragomaskhalos wrote: post #85

Let's hope this doesn't precipitate that favoured bread and circuses smokescreen of Argentine politics, viz idiotic sabre-rattling over the Falklands.

This comment is naive. Our "sabre-rattling" over the Malvinas Islands was done during our vicious, murderous military dictatorship in the 70s/early 80s. We now have a democracy. Any dispute about the islands is done via diplomatic means (regardless of whether you believe the claim has merit, diplomacy is the only legitimate way to resolve it).

No sabre-rattling is possible. Don't confuse democratic Argentina with past dictatorship-ruled Argentina.

Re: S.&P. Says Argentina Has Defaulted

#133

Post by PeterisP » Thu, Jul 31, 2014, 3:36 PM UTC

pessimizer wrote: post #86

blowski wrote: post #80

Earlier quoted context omitted.

I can see both sides here. What surprised me is not that a judge has decided, but that a US judge has decided. It looks like an American judge decided in an American corporation's favour, and against a poorer country, to hell with the damage it will do the world's economy. On the other hand, if the US doesn't uphold the law, then the world economy would be damaged because lending would become more unpredictable. As i…

I just edited my comment to double down due to downvotes, but this ruling will ultimately damage the US more than Argentina. If we establish that it will be impossible to restructure debt if you issue your bonds in the US, we've established that there's no reason to issue your bonds in the US. edit: it's important to keep in mind that 93% of bondholders have agreed to the restructuring. The courts look like they're s…

Well no, if we estabilish what you say, then we've only found out that US jurisdiction is friendly to creditors and less friendly to debtors, and nothing else.

It doesn't mean that there's no reason to issue your bonds in the US, on the contrary - it means that if you have a debt-reputation problem but feel safe in your ability to repay, then you'll want to issue your bonds in US to 'put your money where your mouth is' and get a better price. Or, in cases like Argentina, the potential investors will say 'either US jurisdiction or no deal'.

Re: S.&P. Says Argentina Has Defaulted

#134

Post by lmm » Thu, Jul 31, 2014, 3:36 PM UTC

PeterisP wrote: post #52

jacquesm wrote: post #43

Earlier quoted context omitted.

Investor is too kind a term. They did not exactly buy those papers at nominal value.

Well, given all this hassle, the papers weren't worth nearly their nominal value - and they actually gave money to the original lender, while Argentina didn't; so on that regard they're more fair than Argentina's government at least.

Argentina did give money (or rather, replacement bonds) to the original lender. Not 100%, but an amount they agreed to (which could equally well describe the holdouts' purchases). And Argentina has kept up the interest payments to the original lenders, right up until the holdouts got this court injunction to stop them.

Re: S.&P. Says Argentina Has Defaulted

#135

Post by lazyant » Thu, Jul 31, 2014, 3:37 PM UTC

estebank wrote: post #69

epx wrote: post #44

Earlier quoted context omitted.

Also, Brazilian Real was born to be around 1:1 with USD, but the exchange rate was never fixed, it floated from day one. Argentinian coin (don't remember the name) was 1:1 by force, which made the delay even more catastrophic.

> Argentinian coin Argentinian Peso. Before that it was Austral.

and before austral it was peso

Re: S.&P. Says Argentina Has Defaulted

#136

Post by PeterisP » Thu, Jul 31, 2014, 3:39 PM UTC

lmm wrote: post #134

PeterisP wrote: post #52

Earlier quoted context omitted.

Well, given all this hassle, the papers weren't worth nearly their nominal value - and they actually gave money to the original lender, while Argentina didn't; so on that regard they're more fair than Argentina's government at least.

Argentina did give money (or rather, replacement bonds) to the original lender. Not 100%, but an amount they agreed to (which could equally well describe the holdouts' purchases). And Argentina has kept up the interest payments to the original lenders, right up until the holdouts got this court injunction to stop them.

No, Argentina didn't give money, nor replacement bonds to the original lender - they're the holdout's we're talking about.

They didn't agree to the restructuring amount, and kept the original bonds until selling them to the current bondholder; and as far as I understand, Argentina has not kept up the payments to those who refused the restructuring, that's the whole start of those court proceedings.

Re: S.&P. Says Argentina Has Defaulted

#137

Post by rahimnathwani » Thu, Jul 31, 2014, 3:39 PM UTC

pessimizer wrote: post #63

smackfu wrote: post #45

Earlier quoted context omitted.

It's more like, if you keep defaulting on bonds by saying you don't have to pay them because you changed the rules, eventually no on will buy them unless you let someone else set the rules.

That's what it would be like if this were anything but a holdup. The US government is intervening in the market and preventing bondholders who have agreed on a change in rules from receiving their bond payments, rather than letting the market set the prices. That's the opposite of what you describe here. edit: What I'm saying is only crazy within the bubble of this thread. It's also the opinion of the US government a…

These restructured bonds (on which the judge is preventing payment) weren't 'pre-existing agreements' as claimed by the statement you quoted. They were agreements made _after_ the original bonds had been issued and after the government had defaulted on those bonds.

The equal treatment thing being enforced by the court is something Argentina specifically put into the bond contracts, no? Why should we expect the court not to enforce this condition? (I haven't read the contracts, so am only going from memory of what I've read elsewhere.)

Re: S.&P. Says Argentina Has Defaulted

#138

Post by the_af » Thu, Jul 31, 2014, 3:40 PM UTC

tomp wrote: post #18

wslh wrote: post #6

Earlier quoted context omitted.

These funds are like the patent trolls. The difference is that with patent trolls you are trapped in a inneficient patent system while in this case Argentina has a big part of the responsability in the way the government reestructured 93% of the debt.

Not exactly the same... patent trolls don't do anything, and more often than not their patents aren't really novel inventions. These funds, however, lent Argentina money, while the country promised to pay back all of it, plus interest. I wouldn't like to get back less than I was promised, or even less than I lent in the first place.

The funds did not lend Argentina any money because they are not the original creditors. They picked debt at an extremely low value, and now want to collect extremely high interests.

Vulture funds give nothing to society. They are definitely not a force of good. The comparison to patent trolls is apt.

Re: S.&P. Says Argentina Has Defaulted

#139

Post by evol262 » Thu, Jul 31, 2014, 3:42 PM UTC

Grue3 wrote: post #81

I wonder what highly esteemed economics expert Paul Krugman thinks about this. http://krugman.blogs.nytimes.com/2012/05/03/down-argentina-w...

I know conservatives don't like Krugman, but the man didn't win a Nobel for nothing, and linking a two year old article is simply misleading.

Re: S.&P. Says Argentina Has Defaulted

#140

Post by rahimnathwani » Thu, Jul 31, 2014, 3:43 PM UTC

smackfu wrote: post #119

pessimizer wrote: post #86

Earlier quoted context omitted.

I just edited my comment to double down due to downvotes, but this ruling will ultimately damage the US more than Argentina. If we establish that it will be impossible to restructure debt if you issue your bonds in the US, we've established that there's no reason to issue your bonds in the US. edit: it's important to keep in mind that 93% of bondholders have agreed to the restructuring. The courts look like they're s…

It's a difficult situation because a lot of these bonds have been resold at a steep discount. Someone who paid ten cents on the dollar for a bond has much different financial incentives than I may have as an original buyer... should the fact that there are more of them mean they can screw me over?

Why should the price I paid for the bond give me different incentives? It's only the future cash flows scenarios which are relevant to my decision-making. What I paid is a sunk cost, and doesn't affect my possible actions or payoffs in the future.

(I'm assuming that I wasn't bankrupted due to the price I paid, and that I am a professional investor rather than an emotional gambler)