“A default may be the least worst option”, former lawyer of the Elliot Management fund, Jay Newman, said this week about the resolution of the conflict between Argentina and the Burford fund over the violation of the YPF statute when Cristina Kirchner expropriated the company from the hands of its shareholders, the Eskenazy family. . He stated this in an article published in the British newspaper Financial Times, according to which Argentina has the possibility of canceling the payment of 16 billion dollars if it coordinates a sort of timetable of disbursements over time with all its creditors, keeping account of the context.
Newman is an old connoisseur of Argentina. He worked alongside Paul Singer in the years in which the American billionaire brought Argentina to its knees due to the holdouts process and up until 2016. He knows perfectly well that the country is going through a delicate crisis, that bond prices are discounting a default and that Milei demonstrated goodwill by implementing a 180° turn in economic policy. So, for Newman, Burford may not be able to achieve what Elliot achieved at the time and therefore Argentina has more degrees of freedom in the litigation.
Lawyers Sebastián Maril and Jay Newman, President Javier Milei, Judge Loretta Preska and Minister Luis Caputo.The Milei challenge and the embargoes
Milei took office declaring from day one on the steps of Congress that he will respect contracts and obligations. There are therefore no reasons to think of a default.
At the same time it is also true that the amount of the sentence in favor of Burford is not compensable for the country. If Argentina continues to appeal and goes to the Supreme Court, it will also have to pay costs for the delay of the trial, which would amount to almost 20 billion dollars.
The country is facing a key date January 10th: Argentina reaches an agreement with Burford to pay and start a negotiation or the day after period when there may be calls for an embargo on Burford.
Argentina has already gone through the latter. In 2012 the The frigate Libertad spent two months in a port in Ghana when the Vulture hit bottom he managed to keep him as part of the payment of the sentence that Judge Thomas Griesa had pronounced against Argentina. Griesa had previously blocked payments to holders of restructured bonds, thus leading the country to default.
The story of the Vultures and Burford
Today, ten years later, Judge Loretta Preska, Griesa’s successor in the same New York jurisdiction (Southern District Court), is leading the Petersen-YPF case and is facing possible embargoes against Argentina. Preska will not be able to seize anything that is not state property.
On March 31 this year the judge ruled in favor of the Burford Capital and Eton Park funds: Argentina violated the YPF statute by not bidding on the expropriated funds. “It would be stupid to comply with the YPF law,” Kicillof said in 2012, which Preska used as evidence.
Then came September 8 (also this year) when the judge set the penalty amount at $16 billion. It was the largest ruling against a sovereign state in American history.
It took Burford a decade to reach this figure, Newman says. And what to many would seem like a Wall Street dream come true: making money, according to Newman, is not so clear that it is.
Why?
Because the ruling is important for the value of the Burford stock (in March and April its price in fact made a strong leap in New York) but according to the former Elliot it would not be easy for Burford to convince Argentina to provide guarantees or show an attitude of ready to agree as Preska will notice if the President says so “there’s no money” For the Argentines there will be none even for their creditors. At least not without exhausting all avenues.
A significant issue, Newman argues, are the figures of the sentence: the judge could have made a mistake in the calculations and it was not 16 billion dollars but 300 million dollars at stake (yes, a 98% reduction according to the author).
Nor would it be easy for Burford to get rid of sovereign immunity laws and locate assets elsewhere in the world (“From my personal experience, Argentina is a difficult target”).
For all this and a few other quibbles, and again according to Newman’s version, legal litigation alone is not enough for the country to pay.
The next order of business
Sebastián Maril, a lawyer and CEO of Latam Advisors, who follows the case closely, believes that Newman’s hypothesis suffers from a flaw. The fact that Milei announced a DNU for the deregulation of the economy and contains no mention of this issue could be a mistake for the fruits of his plan. “Will we see investors coming into the country if there are embargo threats?”
For Maril The legal possibility of winning the trial for YPF is minimal because there have been eight years of litigation, eight sentences and they have all been lost.. “And the chances of winning in the next few years are zero.”
According to the lawyer, Argentina should then sit down and negotiate. One option, for example, is to propose paying $1.6 billion over ten years in semi-annual installments. Burford would accept a 50% reduction in Preska’s amount.
Rodolfo Barra, the country’s chief lawyer, Treasury attorney, asked for 90 days to study the case. He will be in front. He filed a lawsuit against the country on behalf of Repsol shareholders in 2013.
The questions remain.
Will the United States show up in court as a friend of Argentina, supporting Milei?
What will Luis Caputo tell investors about the guarantees that Argentina will offer if Milei is no longer there?
It was the Minister of Economy who sealed the deal with Elliot in 2016 through the mediator Daniel Pollack. His priority is to close the fiscal deficit and inflation, but investors will ask him what the conditions will be for investing in the coming years and perhaps this is the key to determining whether Argentina will reverse its stagnation. This week many funds have already wondered how fast the dollar will rise. They no longer believe that Caputo’s 2% can be sustained.
Source: Clarin
