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S.&P. Says Argentina Has Defaulted

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Re: S.&P. Says Argentina Has Defaulted

#151

Post by opendais »

PeterisP wrote: post #126
opendais wrote: post #89

Earlier quoted context omitted.

And now none of the bondholders can be paid because a hedge fund shopped it around to the right judge. That is so much better.

What do you mean, "shopped it around to the right judge"? Argentina agreed that any disputes would be according to the NY/USA law, and the matter went to those exact courts, appealed up to USA Supreme Court. To what judge should the dispute have gone, in your opinion? Is there some important part of this dispute that I'm missing here?

Don't worry about it, the majority doesn't agree with me and arguing about it further is pointless.

Re: S.&P. Says Argentina Has Defaulted

#152

Post by fonosip »

yread wrote: post #68

TLDR; When restructuring defaulted bonds, Argentina agree to borrow in US dollars. They further agreed: - to pay all bond holders equally. - to be governed by New York state law. - to NOT include a collective action clause in the bond agreement which would have forced minority recalcitrant bondholders to enter a restructuring agreement, if a super majority of the bondholders agreed. A small minority (2.5-3%) refused…

Small corrections: - Holdouts are 7.6% - Haircut was around 75% nominal, but in practice was more around 40% since there were some GDP growth incentives and better interest rates

Re: S.&P. Says Argentina Has Defaulted

#153

Post by neeks »

bayesianhorse wrote: post #79
neeks wrote: post #70

We really should have evolved by now to using a monetary system that doesn't revolve around debt.

Which is impossible, because any economic activity that takes some time to come to fruition is already a sort of debt. If you can't use a currency to increase the "money" supply, other forms of credit and investment emerge, and you get the same problems.

Right, because there isn't numerous examples throughout history where debt-free fiat currency flourished. We have been conditioned by neoclassical economics and have refused to confront the pyramid scheme.

Re: S.&P. Says Argentina Has Defaulted

#154

Post by bradleyjg »

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…

>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.

Every country in the world knows that it is going to be easier to restructure if you issue bonds under local law. No one selects New York law for its bonds out of some naive inertia. Argentina specifically went out of its way to select New York law and deliberately put in a pari passu clause because it had a history of defaulting on debt, and it thought it wouldn't be able to raise money, or at least not at the same rate, if it issued bonds under local law.

I can't think of any possible reason to relieve a country of obligations that were deliberately and knowingly undertaken to tie its own hands in order to make its debt more credible.

If you want collective action on restructured debt put in a collective action clause. If you want a sweetheart interpretation of your debt clauses issue it under local law. Every country that is issuing debt knows these things, they aren't rocket science. The reason they sometimes choose not to is because they want to pay a lower coupon and/or be sure that the whole issue will be purchased.

Re: S.&P. Says Argentina Has Defaulted

#155

Post by dieg0 »

Everybody involved in the 2001 default knew this was going to happen. And it can even be said that Argentina didn’t plan to pay what they promised from the beginning, although I cannot attest to it.

One detail I want to add to the discussion is that in the past few years the global panorama changed for Argentina, they sit on top of the second largest shale gas reserve in the world, and plan to extract it. They need money to start working and suddenly felt the urge to settle this issue.

Known fact: There is the Argentinean way of doing things, not straightforward, which is why talking about the bondholders like victims sounds naïve. They saw they might get their money now, and with Argentina’s shell gas urge probably felt the call to make more.

To me there is a larger scope, take a look at tech companies like Google and Facebook, they placed their head regional offices in Argentina. Both companies knew well in advance that the political and judicial system in Argentina is completely corrupt but still decided to direct their regional efforts from Buenos Aires. Why would anyone place offices in Argentina, when there is Chile, Perú or Colombia, countries that have greater political, social and economic stability, extremely better infrastructure, better weather and even tastier food.

I could be going paranoid but I believe it is simple; it looks like the big guys like to get in bed with the naughty ones, rather than the honest and better-behaved gals around the corner. This makes sense to me, after all, the bigger the risk the greater the possible reward.

The country is extremely wealthy, but that wealth is not getting to everyone (not that uncommon), and maybe that’s why the demonization of the international monetary funds has so much appeal locally. The certainty is that by the end of this story, it will be the Argentinean people who will be paying for this.

Re: S.&P. Says Argentina Has Defaulted

#156

Post by raphar »

yread wrote: post #68

TLDR; When restructuring defaulted bonds, Argentina agree to borrow in US dollars. They further agreed: - to pay all bond holders equally. - to be governed by New York state law. - to NOT include a collective action clause in the bond agreement which would have forced minority recalcitrant bondholders to enter a restructuring agreement, if a super majority of the bondholders agreed. A small minority (2.5-3%) refused…

Additionaly, the hedge funds weren't among the original creditors. They bought the defaulted bonds on the cheap, just to pursue legal battle. There are other creditors holding defaulted bonds, but these funds are the only ones that got a favorable ruling.

Re: S.&P. Says Argentina Has Defaulted

#157

Post by bayesianhorse »

neeks wrote: post #153
bayesianhorse wrote: post #79

Earlier quoted context omitted.

Which is impossible, because any economic activity that takes some time to come to fruition is already a sort of debt. If you can't use a currency to increase the "money" supply, other forms of credit and investment emerge, and you get the same problems.

Right, because there isn't numerous examples throughout history where debt-free fiat currency flourished. We have been conditioned by neoclassical economics and have refused to confront the pyramid scheme.

Can you name one such debt-free currency? Preferably one that works in a modern economy? Don't forget: A lot of our risk-management and wealth today depends on derivatives and a well running financial market.

To say that a completely different but unproven system works better is a very tough point to defend.

Re: S.&P. Says Argentina Has Defaulted

#158

Post by PeterisP »

blowski wrote: post #110
pessimizer wrote: post #99

Earlier quoted context omitted.

I'm wondering along with them. Is there any question that this will nullify their agreements and force Argentina to pay them in full also, or were the restructuring agreements written well enough to prevent that? I have no idea - I wish I knew more about the details. edit: it's conceivable that Argentina could blink and pay the vultures off, but if they're then liable for all of the debt (which they can't pay) that m…

So is there any way that, if Argentina completely defaults, the 93% who have agreed the restructured payments can sue the 7% who haven't? Can S&P's opinion just be ignored while Argentina renegotiates with 100% of them? Can this still end up in international arbitration?

I don't see any grounds for what "93% who have agreed the restructured payments can sue the 7% who haven't" - what claim do you see there?

The 7% don't seem to have done anything illegal (obtaining and enforcing a court judgment usually isn't), nor they have any agreements or liabilities towards the 93%, they're not obligated to act in the interests of those 93% when negotiating - even if they'd say "ahh we just did it out of spite to screw you guys, trololol" then it's within their rights to do so.

I doubt also that S&P opinion would be ignored - there are overdue payments that aren't being paid, they're simply acknowledging that fact.

Re: S.&P. Says Argentina Has Defaulted

#159

Post by u124556 »

lmm wrote: post #124
simonebrunozzi wrote: post #82

I'm very sorry for Argentinians - I've been there last year, visiting relatives (I'm from Italy, and my grand aunt moved to Argentina in the 50s - she was a bit over 20 - to escape an arranged marriage in Italy, and came back only in the 80s). Argentina is a beautiful country, with problems that are very similar to the ones that we have in Italy - but different scenarios, and different economies. I see this as an opp…

Bitcoin would make these problems worse. The whole reason they got into this mess in the first place was by pegging their currency to the dollar, which meant they couldn't devalue the peso when they should have done for a long time; when the eventual reckoning came it was brutal. With bitcoin it would be much much worse, because you can't ever do that decoupling, and you wouldn't even get the US government doing writ…

Then you just change the price in bitcoins: this was 0.005 bitcoins yesterday? well, today it will be 0.007.

Re: S.&P. Says Argentina Has Defaulted

#160

Post by blowski »

PeterisP wrote: post #158
blowski wrote: post #110

Earlier quoted context omitted.

So is there any way that, if Argentina completely defaults, the 93% who have agreed the restructured payments can sue the 7% who haven't? Can S&P's opinion just be ignored while Argentina renegotiates with 100% of them? Can this still end up in international arbitration?

I don't see any grounds for what "93% who have agreed the restructured payments can sue the 7% who haven't" - what claim do you see there? The 7% don't seem to have done anything illegal (obtaining and enforcing a court judgment usually isn't), nor they have any agreements or liabilities towards the 93%, they're not obligated to act in the interests of those 93% when negotiating - even if they'd say "ahh we just did…

> I don't see any grounds for what "93% who have agreed the restructured payments can sue the 7% who haven't" - what claim do you see there?

I don't know whether I see a claim, but I wondered whether a clever lawyer would. Reading around, I'm positing ideas for what might happen next.

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