Ar­gentina gloats af­ter rais­ing US$1.4 bil. in mas­sive bond sale

The China Post - - WORLD BUSINESS -

Ar­gentina’s fi­nance min­is­ter thumbed his nose at U.S. hedge fund cred­i­tors Wed­nes­day af­ter the coun­try an­nounced it had raised US$1.4 bil­lion in a bond sale, nearly three times what was ex­pected.

But lawyers for the hedge funds im­me­di­ately sought sup­port in the U.S. dis­trict court in New York to in­ves­ti­gate if the is­sue vi­o­lated pre­vi­ous rul­ings against Buenos Aires.

Judge Thomas Griesa, who has con­sis­tently sup­ported NML Cap­i­tal and Aure­lius Cap­i­tal Man­age­ment’s case for pay­ment of US$1.8 bil­lion on long-de­faulted Ar­gen­tine bonds they hold, told Ar­gentina’s lawyer to pro­vide de­tails on the sale.

Buenos Aires of­fered the U.S. dollar- de­nom­i­nated debt in a di­rect sale un­der lo­cal law late Mon­day to get around Griesa’s ear­lier rul­ings that have blocked its ac­cess to global cap­i­tal mar­kets.

The debt sale took in US$1.4 bil­lion, far be­yond the orig­i­nal of­fer of US$500 mil­lion in nineyear, 8.75 per­cent BONAR bonds.

The Ar­gen­tine fi­nance min­istry said it had re­ceived of­fers for nearly US$1.9 bil­lion, and the av­er­age yield on the bonds came in at 8.96 per­cent.

The 24-hour sale was as­sisted by Deutsche Bank and BBVA, ac­cord­ing to Robert Co­hen, an at­tor­ney for NML Cap­i­tal, who la­beled it a “highly un­usual” trans­ac­tion and sug­gested it may have evaded pre­vi­ous or­ders by Griesa aimed at forc­ing Buenos Aires to pay the hedge funds.

NML, Aure­lius Cap­i­tal Man­age­ment and a hand­ful of smaller “hold­out” in­vestors have sought to block Ar­gentina’s av­enues to cap­i­tal mar­kets un­til it pays them the full value of long-de­faulted bonds that they hold.

Buenos Aires has in­sisted that it does not have to pay their claims as they re­fused to join the 93 per­cent of cred­i­tors who joined the re­struc­tur­ing of US$100 bil­lion in debt the coun­try de­faulted on in 2001.

Back­ing the hold­outs, Griesa ruled three years ago that Buenos Aires can­not make pay­ments on the restruc­tured debt un­til it pays them first, and last year or­dered the cus­to­dian banks in­volved to not process the pay­ments, even on U.S. dollar debt is­sued un­der Ar­gentina law.

In Wed­nes­day’s hear­ing, Co­hen said he wanted to know whether the bond sale con­tra­vened Griesa’s or­ders and whether any of the funds raised should be used to sat­isfy hold­out claims.

Ar­gentina’s lawyer Jonathan Black­man said Griesa does “not have ju­ris­dic­tion to stop this trans­ac­tion,” which he said was purely do­mes­tic.

Although Griesa had pre­vi­ously ruled that his rul­ings ap­plied to some U.S.-dollar debt is­sued un­der Ar­gen­tine lo­cal law, “this couldn’t pos­si­bly evade the court’s in­junc­tions,” in­sisted Black­man.

Griesa though called Co­hen’s re­quest for in­for­ma­tion “le­git­i­mate,” though he did not say the bond is­sue vi­o­lated his or­ders.

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