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

Re: S.&P. Says Argentina Has Defaulted

#31

Post by jpablo » Thu, Jul 31, 2014, 2:05 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.

As I understand this funds didn't lent Argentina anything, they bought the bonds in the open market at a huge discount.

Re: S.&P. Says Argentina Has Defaulted

#32

Post by Nursie » Thu, Jul 31, 2014, 2:07 PM UTC

So in the coming days we'll be hearing a lot more about 'Las Malvinas' and how Britain is an evil colonial power and stole the islands?

That usually seems to be what happens when Argentina has internal problems that need to be distracted from.

Re: S.&P. Says Argentina Has Defaulted

#33

Post by tomp » Thu, Jul 31, 2014, 2:08 PM UTC

lclarkmichalek wrote: post #26

tomp wrote: post #12

Well, the recent Greek default seems to have been handled quite gracefully... (but of course, Greece is part of the EU zone, so there was a lot of help available) http://www.economist.com/node/21550271

This is the second default in 13 years, with (as you mention) no strong regional bank to support them, and (most likely) in a country without the political willpower to push through reforms to prevent this kind of thing happening again.

From another article linked in the HN comments, it seems that this is really a finalization of the 2001 default. Argentina is not able to pay the (current) bond holders only because the courts won't let it do so.

Re: S.&P. Says Argentina Has Defaulted

#34

Post by acqq » Thu, Jul 31, 2014, 2:08 PM UTC

sciurus wrote: post #3

To understand background and potential implication, I found http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-the-... helpful.

Also see

http://dealbook.nytimes.com/2014/07/30/in-hedge-fund-argenti...

"The hedge fund firm of billionaire Paul E. Singer has about 300 employees, yet it has managed to force Argentina, a nation of 41 million people, into a position where it now has to contemplate a humbling surrender."

"Argentina on Wednesday failed to make scheduled payments on its government bonds. The country has the money to pay the bonds. But a federal court in Manhattan has ruled that unless Argentina settles its debt dispute with Mr. Singer’s firm, Elliott Management, it is barred from paying its main bondholders." (...)

"“We’ve had a lot of bombs being thrown around the world, and this is America throwing a bomb into the global economic system,” said Joseph E. Stiglitz, the economist and professor at Columbia University. “We don’t know how big the explosion will be — and it’s not just about Argentina.”" (...)

"It is legally challenging for American investors to sue foreign governments in United States courts. But in 2012, Elliott achieved a stunning breakthrough in the Federal District Court in Manhattan. Judge Thomas P. Griesa ruled that whenever Argentina paid the exchange bonds, it also had to pay the holdouts. Argentina could not ignore the ruling and pay the exchange bondholders because Judge Griesa also ruled that any financial firm that distributed payments to the bondholders would be in contempt. Argentina placed $539 million with the Bank of New York Mellon in June to pay its bondholders, but the bank did not transfer it."

Re: S.&P. Says Argentina Has Defaulted

#35

Post by PythonicAlpha » Thu, Jul 31, 2014, 2:09 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.

I don't agree. As much I know, they lent Argentina no money. They bought bonds (I think that's the correct term) that already lost nearly all of their value since the land was already in trouble then, for pennies and now they want the full money back, that they never spent. As much I remember the profit would have been 16x the money spent. So, they lent no money to the country .... the papers already lost their value since the risk was high of total loss or a haircut.

I guess, even with the haircut settlement, even then they would have earning a lot of money -- but they where very greedy.

Our financial system should not foster poor greed!

Re: S.&P. Says Argentina Has Defaulted

#36

Post by pibefision » Thu, Jul 31, 2014, 2:12 PM UTC

eudox wrote: post #2

The worst thing about living in Uruguay is being right next to Them. Now this happens, and we're going to get the fallout.

Well, Chile is being in the left, and does not have any problem. Your argument is not very strong.

In true, Uruguay has it owns problems.

Re: S.&P. Says Argentina Has Defaulted

#37

Post by gizmo686 » Thu, Jul 31, 2014, 2:13 PM UTC

blowski wrote: post #19

sciurus wrote: post #3

To understand background and potential implication, I found http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-the-... helpful.

> Argentina issued bonds under New York law. Until I read this, I assumed that international bonds were issued under international law, with the World Bank as the arbitrator. With the US as both lender and arbitrator, it seems to give them a lot of power.

I am not a lawyer.

My understanding of this type of clause is not that it makes New York the arbitrator, but rather clarifies for whoever does arbitrate that New York laws should be used. This seems important when working across national (or state) boundries do prevent ambiguity as to what set of laws is being used.

I suspect that it is simmilar to copying the relevent laws into a contract and signing that, which is to say that local laws still apply.

Re: S.&P. Says Argentina Has Defaulted

#38

Post by TheOtherHobbes » Thu, Jul 31, 2014, 2:14 PM UTC

jpablo wrote: post #31

tomp wrote: post #18

Earlier quoted context omitted.

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.

As I understand this funds didn't lent Argentina anything, they bought the bonds in the open market at a huge discount.

Which is how debt collectors work.

The hedge fund guys are just debt sharks. They're contributing nothing of value to anyone - possibly not even to themselves, because it's not so unlikely there will be international fallout that massively damages their other holdings.

Re: S.&P. Says Argentina Has Defaulted

#39

Post by herge » Thu, Jul 31, 2014, 2:15 PM UTC

blowski wrote: post #19

sciurus wrote: post #3

To understand background and potential implication, I found http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-the-... helpful.

> Argentina issued bonds under New York law. Until I read this, I assumed that international bonds were issued under international law, with the World Bank as the arbitrator. With the US as both lender and arbitrator, it seems to give them a lot of power.

I'm not sure but I bet that a country can issue bonds under any law it wants. It's just more likely to get people to buy bonds if they are under New York law (as opposed to say Argentinian law, where foreign bondholders would hold no sway).

Re: S.&P. Says Argentina Has Defaulted

#40

Post by sp332 » Thu, Jul 31, 2014, 2:16 PM UTC

turnip1979 wrote: post #7

[deleted] wrote: post #5

Earlier quoted context omitted.

[deleted]

Yup. It shows the power of creditors when they take to the courts. It seems odd that that all the other creditors accepted a haircut ... and the one who didn't is causing the present situation.

I think the original creditors also got a "haircut" when they sold to the current bond holders. It's the new owners, who paid about 1/3 of the nominal value, who are holding out for a huge return.