Do you have adblock enabled?
If you can read this, either the style sheet didn't load or you have an older browser that doesn't support style sheets. Try clearing your browser cache and refreshing the page.

(BBC-US)   Hand of God returns for Argentina, only this time striking and with incredible might. Argentina goes full teabagger and immediately blames America   (bbc.com) divider line 47
    More: Followup, debt defaults, distressed debt, The Hague  
•       •       •

2514 clicks; posted to Business » on 31 Jul 2014 at 10:43 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



47 Comments   (+0 »)
   
View Voting Results: Smartest and Funniest

Archived thread
 
2014-07-31 09:07:00 AM  
They were desperate for money during their economic crisis, so they issued bonds with high returns hoping that bond buyers will infuse them with capital in the short term.

And now that bond buyers bought them and infused them with capital, they want those bond buyers who bailed them out to take 1/3rd of what they bought and blaming the ones who don't agree as being some sort of predatory lender.

Is that the gist of the situation? That's what I'm getting out of this article.
 
2014-07-31 09:37:16 AM  
The investors are US hedge funds that bought debt cheaply after Argentina's economic crisis in 2001-2002

I'm not exactly an investing genius, but I do know enough to avoid south american bonds.

They are also known as "hold-outs" because they did not sign up to a restructuring of debt which the majority of bond-holders agreed to in 2005 and 2010.  Under that deal, investors agreed to settle for about one-third of what they were originally owed

So the writing was on the wall, but they're still thinking 100% return on capital.  I have even less sympathy now.
 
2014-07-31 10:59:12 AM  

RexTalionis: They were desperate for money during their economic crisis, so they issued bonds with high returns hoping that bond buyers will infuse them with capital in the short term.

And now that bond buyers bought them and infused them with capital, they want those bond buyers who bailed them out to take 1/3rd of what they bought and blaming the ones who don't agree as being some sort of predatory lender.

Is that the gist of the situation? That's what I'm getting out of this article.


Incorrect.

Short version:
Argentina defaulted on their debts over a decade ago.  93% of the debt holders quickly reached a new agreement.  A few years down the line, the remaining debt holders who didn't reach an agreement sold their debt to a Venture Capitalist for a fraction of a penny on the dollar.

Now the Venture Capitalist has been successfully getting some courts to see that NO ONE gets paid until THEY get the full payment of what the debt was worth pre-default.
 
2014-07-31 10:59:16 AM  
I thought Tea Party Patriots loved America and it was the D-Baggers who hated America?
 
2014-07-31 11:06:02 AM  
The bond-holders are demanding a full pay-out of $1.3bn (£766m).
Argentina says the bond-holders are "vultures" using the South American country's debt problems to make a big profit.
The investors are US hedge funds that bought debt cheaply after Argentina's economic crisis in 2001-2002.
They are also known as "hold-outs" because they did not sign up to a restructuring of debt which the majority of bond-holders agreed to in 2005 and 2010.
Under that deal, investors agreed to settle for about one-third of what they were originally owed.
However, hedge funds NML and Aurelius Capital Management bought up a large chunk of the remaining distressed debt at low prices.
They demand to be paid the full face value of their holding.



fark 'em. Let the hedge funds earn their money the old-fashioned way. Insider trading, high-frequency trading, and dealing blow on the trading floors.
 
2014-07-31 11:11:18 AM  
Argentina defaulted on their external debt in 2001.      Argentina restructured their debt and worked out a settlement with 93% of  bondholders swapping out the old issued bonds with the new restructured bonds , basically giving them 25 cents on the dollar.     7% of the bondholders held out and refused to participate with the settlement, most notably a few poweful US hedge funds (aka the so-called "vulture capitalists").    Many of these hedge funds bought Argentina's debt after it had already defaulted for pennies on the dollar, thinking at the very least they could sue Argentina and win a court settlement that would net a hefty rate of return.    It should be noted that the most profile hedge fund involved in this dispute is Paul Singer's Elliot Management.   Singer has a long history of these kinds of deals.  Singer has previously bought distressed defaulted sovereign debt in Peru, Congo and then sued the countries and then sued those countries for default and won settlements that doubled or tripled what he bought the distressed debt for.

   Part of the settlement with the 93% involved a contractual clause that said Argentina couldn't negotiate a better deal with the holdouts down the road.   If they did, they would have to give the same conditions to everyone.    Argentina claims they couldn't settle with these 7% of holdouts even if they wanted to, without breaking the contractual clause they are bound to by the other 93% of bondholders.   They want to continue to pay their debt obligations.     Singer and a few of the other hedge funds comprising the 7%  took Argentina to court claiming they should get their money before Argentina pays off the other 93%.  The hedge funds claim Argentina's agreement with the 93% has no bearing on their obligations to them.  A NY Judge agreed with the hedge funds.    The Supreme Court refused to take up the case.    Argentina says it's hands are tied.    The hedge funds, leveraged by the court rulings have been trying to negotiate a sweet settlement deal that would net them a huge rate of return on their initial investment.  Eventually a deal will get worked out where the hedge funds negotiate a settlement, but it's been a big game of chicken to get to this point.
 
2014-07-31 11:11:42 AM  

Satanic_Hamster: RexTalionis: They were desperate for money during their economic crisis, so they issued bonds with high returns hoping that bond buyers will infuse them with capital in the short term.

And now that bond buyers bought them and infused them with capital, they want those bond buyers who bailed them out to take 1/3rd of what they bought and blaming the ones who don't agree as being some sort of predatory lender.

Is that the gist of the situation? That's what I'm getting out of this article.

Incorrect.

Short version:
Argentina defaulted on their debts over a decade ago.  93% of the debt holders quickly reached a new agreement.  A few years down the line, the remaining debt holders who didn't reach an agreement sold their debt to a Venture Capitalist for a fraction of a penny on the dollar.

Now the Venture Capitalist has been successfully getting some courts to see that NO ONE gets paid until THEY get the full payment of what the debt was worth pre-default.


That's what a default is

Argentina wrote the damn bond and failed to properly negotiate w/ the 7%, this is all on them
 
2014-07-31 11:13:54 AM  

ShadowKamui: Satanic_Hamster: RexTalionis: They were desperate for money during their economic crisis, so they issued bonds with high returns hoping that bond buyers will infuse them with capital in the short term.

And now that bond buyers bought them and infused them with capital, they want those bond buyers who bailed them out to take 1/3rd of what they bought and blaming the ones who don't agree as being some sort of predatory lender.

Is that the gist of the situation? That's what I'm getting out of this article.

Incorrect.

Short version:
Argentina defaulted on their debts over a decade ago.  93% of the debt holders quickly reached a new agreement.  A few years down the line, the remaining debt holders who didn't reach an agreement sold their debt to a Venture Capitalist for a fraction of a penny on the dollar.

Now the Venture Capitalist has been successfully getting some courts to see that NO ONE gets paid until THEY get the full payment of what the debt was worth pre-default.

That's what a default is

Argentina wrote the damn bond and failed to properly negotiate w/ the 7%, this is all on them


Meanwhile, Paul Singer finally realizes that buying distressed sovereign debt doesn't alway net a 2X or 3X ROI.

I say they're perfect for each other.
 
2014-07-31 11:17:46 AM  

InmanRoshi: Meanwhile, Paul Singer finally realizes that buying distressed sovereign debt doesn't alway net a 2X or 3X ROI.

I say they're perfect for each other.


I say let the hedge funds eat cake.
 
2014-07-31 11:20:20 AM  
img2.wikia.nocookie.net
 
2014-07-31 11:21:36 AM  

Marcus Aurelius: InmanRoshi: Meanwhile, Paul Singer finally realizes that buying distressed sovereign debt doesn't alway net a 2X or 3X ROI.

I say they're perfect for each other.

I say let the hedge funds eat cake.


The only cake they're going to eat is whatever the court order Argentina to give them

The ultimate stupidity in all this is if the Argentina government had simply given up on the bogus Falklands claims and taken UKs deal to share the oil/gas royalties, they would of had more than enough money.
 
2014-07-31 11:24:24 AM  
Hey, at least it is only the HAND of God. Could have been worse:

img.fark.net
 
2014-07-31 11:49:03 AM  
I'm an American and if I were Argentina I wouldn't pay a cent either.

/no connection to anyone involved in the case.
 
2014-07-31 11:49:20 AM  

Satanic_Hamster: Incorrect.

Short version:
Argentina defaulted on their debts over a decade ago.  93% of the debt holders quickly reached a new agreement.  A few years down the line, the remaining debt holders who didn't reach an agreement sold their debt to a Venture Capitalist for a fraction of a penny on the dollar.

Now the Venture Capitalist has been successfully getting some courts to see that NO ONE gets paid until THEY get the full payment of what the debt was worth pre-default.


You're wrong.

The contract as part of the debt was that all bond holders would be treated the same, ie Argentina couldn't pay some and not others.

Since the 'hold-outs' refused to RE negotiate the contract, Argentina stopped paying them.  Hold-outs sued to force Argentina to comply with the contract.
 
2014-07-31 12:04:06 PM  

worlddan: I'm an American and if I were Argentina I wouldn't pay a cent either.

/no connection to anyone involved in the case.


If I were Argentina I would have spies kill the hedge fund managers that were suing me. Shouldn't be too hard. I doubt even the US government would notice much, a few asshole hedge managers would not even make the news.

Also, this is why the rest of the world hates the US. The Supreme Court didn't even take it, and lower courts just sided with the debt collectors - but these assholes bought the debt at pennies to the dollar, specifically hoping to sue. And this negatively affects countries that need every cent. These douches don't need it. And they refuse to take the terms offered before.

Seriously, I wouldn't pay, Argentina shouldn't pay, and these guys can burn in hell for all I care.
 
2014-07-31 12:08:27 PM  

adamatari: If I were Argentina I would have spies kill the hedge fund managers that were suing me. Shouldn't be too hard. I doubt even the US government would notice much, a few asshole hedge managers would not even make the news.

Also, this is why the rest of the world hates the US. The Supreme Court didn't even take it, and lower courts just sided with the debt collectors - but these assholes bought the debt at pennies to the dollar, specifically hoping to sue. And this negatively affects countries that need every cent. These douches don't need it. And they refuse to take the terms offered before.

Seriously, I wouldn't pay, Argentina shouldn't pay, and these guys can burn in hell for all I care


You sound like a 12 year old.


Argentina hasn't (ever) paid their bills.  This is why this is happening.
 
2014-07-31 12:08:34 PM  

adamatari: If I were Argentina I would have spies kill the hedge fund managers that were suing me. Shouldn't be too hard. I doubt even the US government would notice much, a few asshole hedge managers would not even make the news.


  I imagine the US politicians would definitely notice.
 
2014-07-31 12:09:22 PM  
At least the bond-holders got a nice ship sitting in an African port out of the deal.
 
2014-07-31 12:55:43 PM  

StrikitRich: I thought Tea Party Patriots loved America and it was the D-Baggers who hated America?


That is true.
 
2014-07-31 01:29:58 PM  
This article has no parallel to the tea party, expressed or even implied. Somebody tell Drew that the politics tab is leaking again.
 
2014-07-31 01:51:47 PM  

cgraves67: At least the bond-holders got a nice ship sitting in an African port out of the deal.


Ghana. That ship left long ago and the dispute settled fully between the two.

It's funny. Both parties are slimy weasels but one is clearly smarter.
 
2014-07-31 01:53:14 PM  

Intrepid00: cgraves67: At least the bond-holders got a nice ship sitting in an African port out of the deal.

Ghana. That ship left long ago and the dispute settled fully between the two.

It's funny. Both parties are slimy weasels but one is clearly smarter.


I'm talking about the debt holders and Argentina.
 
2014-07-31 02:12:59 PM  

StrikitRich: I thought Tea Party Patriots loved America


Much like an abusive husband loves his wife.
 
2014-07-31 02:40:40 PM  

happydude45: StrikitRich: I thought Tea Party Patriots loved America and it was the D-Baggers who hated America?

That is true.


Argentina is (in part) blaming the US government. You get it now?
 
2014-07-31 02:43:32 PM  
Why do all of these Latin American countries have such an acrimonious relationship with the USA? Is there some sort of history between the two groups that is related to short term decision making by the US intelligence community that had very negative long term effects on the security of the United States?
 
2014-07-31 02:46:16 PM  
Thanks Obama!
 
2014-07-31 03:25:16 PM  

Moopy Mac: Why do all of these Latin American countries have such an acrimonious relationship with the USA? Is there some sort of history between the two groups that is related to short term decision making by the US intelligence community that had very negative long term effects on the security of the United States?


Maybe that's the excuse, but really it's classic misdirection
 
2014-07-31 03:36:50 PM  

Moopy Mac: Why do all of these Latin American countries have such an acrimonious relationship with the USA? Is there some sort of history between the two groups that is related to short term decision making by the US intelligence community that had very negative long term effects on the security of the United States?


Check out "gunboat diplomacy" some time.  Also Monroe Doctrine.  US intelligence community issues with foreign governments are step towards better relationships in comparison to what came before.

Tapping phones and sniffing all their packets is weak sauce in comparison to what was done on behalf of United Fruit.  The relationship between the US and other countries in the Americas has been unbalanced since the early 1800s.
 
2014-07-31 03:40:34 PM  

Satanic_Hamster: RexTalionis: They were desperate for money during their economic crisis, so they issued bonds with high returns hoping that bond buyers will infuse them with capital in the short term.

And now that bond buyers bought them and infused them with capital, they want those bond buyers who bailed them out to take 1/3rd of what they bought and blaming the ones who don't agree as being some sort of predatory lender.

Is that the gist of the situation? That's what I'm getting out of this article.

Incorrect.

Short version:
Argentina defaulted on their debts over a decade ago.  93% of the debt holders quickly reached a new agreement.  A few years down the line, the remaining debt holders who didn't reach an agreement sold their debt to a Venture Capitalist for a fraction of a penny on the dollar.

Now the Venture Capitalist has been successfully getting some courts to see that NO ONE gets paid until THEY get the full payment of what the debt was worth pre-default.


You have it exactly right, Satanic Hamster. Ill expand the explanation a bit more.
The risk of bankruptcy is always known - that is why some bonds have higher yields than others. In fact, for the simplest types of bonds, its the ONLY reason for the difference in yield. Investors accept this risk in exchange for the higher yield.

In this case, some bondholders didnt agree to a bankruptcy-avoiding restructure, so their bonds were worth next to nothing. The restructure agreement was the best way to avoid an even worse bankruptcy. A restructure like this is a fairly common way to handle the problem.
Now, those holdout bondholders somehow think they can demand full value for those bonds, plus any interest for amounts that are overdue.
This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this. If this stands, countries will not be able to restructure their debt because bondholders will refuse, and instead would be forced into outright bankruptcy that will harm EVERYBODY much more - including the investors. Future investors will never have the option to restructure with a country soon enough to avoid the default.
This investor is demanding that he makes his profit from the huge risk premium, AND demanding that the bond not have any risk. Thats not how investing works. The guy should be thrown out of the courthouse, in my opinion.
 
2014-07-31 03:44:06 PM  

Chris45215: Satanic_Hamster: RexTalionis: They were desperate for money during their economic crisis, so they issued bonds with high returns hoping that bond buyers will infuse them with capital in the short term.

And now that bond buyers bought them and infused them with capital, they want those bond buyers who bailed them out to take 1/3rd of what they bought and blaming the ones who don't agree as being some sort of predatory lender.

Is that the gist of the situation? That's what I'm getting out of this article.

Incorrect.

Short version:
Argentina defaulted on their debts over a decade ago.  93% of the debt holders quickly reached a new agreement.  A few years down the line, the remaining debt holders who didn't reach an agreement sold their debt to a Venture Capitalist for a fraction of a penny on the dollar.

Now the Venture Capitalist has been successfully getting some courts to see that NO ONE gets paid until THEY get the full payment of what the debt was worth pre-default.

You have it exactly right, Satanic Hamster. Ill expand the explanation a bit more.
The risk of bankruptcy is always known - that is why some bonds have higher yields than others. In fact, for the simplest types of bonds, its the ONLY reason for the difference in yield. Investors accept this risk in exchange for the higher yield.

In this case, some bondholders didnt agree to a bankruptcy-avoiding restructure, so their bonds were worth next to nothing. The restructure agreement was the best way to avoid an even worse bankruptcy. A restructure like this is a fairly common way to handle the problem.
Now, those holdout bondholders somehow think they can demand full value for those bonds, plus any interest for amounts that are overdue.
This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this. If this stands, countries will not be able to restructure their debt because bondholders will refuse, and instead would be forced into outright bankruptcy that will harm EVERYBODY much more - including the investors. Future investors will never have the option to restructure with a country soon enough to avoid the default.
This investor is demanding that he makes his profit from the huge risk premium, AND demanding that the bond not have any risk. Thats not how investing works. The guy should be thrown out of the courthouse, in my opinion.


RUFO should be mentioned. If the vulture funds get full price, all the other Bondholders automatically get 100%.
 
2014-07-31 03:59:43 PM  

Chris45215: Now, those holdout bondholders somehow think they can demand full value for those bonds, plus any interest for amounts that are overdue.
This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this. If this stands, countries will not be able to restructure their debt because bondholders will refuse, and instead would be forced into outright bankruptcy that will harm EVERYBODY much more - including the investors. Future investors will never have the option to restructure with a country soon enough to avoid the default.
This investor is demanding that he makes his profit from the huge risk premium, AND demanding that the bond not have any risk. Thats not how investing works. The guy should be thrown out of the courthouse, in my opinion.


And, again, it's even more bs then that; the original bond holders basically through these bonds in the trash.  The current bond holders are just zombie debt collectors.
 
2014-07-31 04:05:26 PM  
mcreadyblue:
 The restructure agreement was the best way to avoid an even worse bankruptcy. A restructure like this is a fairly common way to handle the problem.
Now, those holdout bondholders somehow think they can demand full value for those bonds, plus any interest for amounts that are overdue.
This claim is total BS
, and Im amazed that Argentina had bonds that allow holdouts to do this. If this stands, countries will not be able to restructure their debt because bondholders will refuse, and instead would be forced into outright bankruptcy that wil ...



These New York-issued bonds of the 1990s had two other important features besides being issued under New York legal jurisdiction. The incorporation of the  paripassu clause and the absence of the  collective action clause. The  paripassu clause holds that Argentina agrees to treat all creditors on equal terms (especially regarding payments of coupons and capital). The  collective action clausestates that in the case of a debt restructuring, if a certain percentage of creditors accept the debt swap, then creditors who turn down the offer (the "holdouts") automatically must accept the new bonds. However, when Argentina defaulted on its bonds at the end of 2001, it did so with bonds that included the  paripassu clause but which did  not require collective action by creditors.

Under the contract that Argentina itself offered to its creditors, which did not include thecollective action clause, any creditor is entitled to receive 100 percent of the bonus even if 99.9 percent of the creditors decided to enter a debt swap. And this is precisely what happened with the 2001 default. When Argentina offered new bonds to its creditors following the default, the "holdouts" let Argentina know that under the contract of Argentine bonds, they still have the right to receive 100 percent of the bonds under "equality of conditions" (paripassu)with those who accepted the restructuring. That is, Argentina cannot pay the "holdins" without paying the "holdouts" according to the terms of the debt.
 
2014-07-31 04:07:11 PM  
Uh Huh. You know, Our country may have its faults, but they're along different lines...
 
2014-07-31 04:28:19 PM  

MugzyBrown: mcreadyblue:
 The restructure agreement was the best way to avoid an even worse bankruptcy. A restructure like this is a fairly common way to handle the problem.
Now, those holdout bondholders somehow think they can demand full value for those bonds, plus any interest for amounts that are overdue.
This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this. If this stands, countries will not be able to restructure their debt because bondholders will refuse, and instead would be forced into outright bankruptcy that wil ...


These New York-issued bonds of the 1990s had two other important features besides being issued under New York legal jurisdiction. The incorporation of the  paripassu clause and the absence of the  collective action clause. The  paripassu clause holds that Argentina agrees to treat all creditors on equal terms (especially regarding payments of coupons and capital). The  collective action clausestates that in the case of a debt restructuring, if a certain percentage of creditors accept the debt swap, then creditors who turn down the offer (the "holdouts") automatically must accept the new bonds. However, when Argentina defaulted on its bonds at the end of 2001, it did so with bonds that included the  paripassu clause but which did  not require collective action by creditors.

Under the contract that Argentina itself offered to its creditors, which did not include thecollective action clause, any creditor is entitled to receive 100 percent of the bonus even if 99.9 percent of the creditors decided to enter a debt swap. And this is precisely what happened with the 2001 default. When Argentina offered new bonds to its creditors following the default, the "holdouts" let Argentina know that under the contract of Argentine bonds, they still have the right to receive 100 percent of the bonds under "equality of conditions" (paripassu)with those who accepted the restructuring. That is, Argentina cannot pay the "holdins" wit ...


You've pointed out the part that has puzzled me through this whole thing - was the collective action clause left out on purpose, or was it just not in the paperwork - ie. clerical error?  Having the equal treatment but not the collective action clause just makes no sense - almost like someone had a cut and paste screwup.  Or did some idiot think the paripassu clause encompassed the collective action clause and just left it out as "unnecessary"?  One could mistakingly take the paripassu clause and believe that if you restructure one creditor, all creditors have to follow along - it would be like holding a spear backwards and not understanding why you weren't skewering the enemy.  It would be a very novel reading and a wrong one at that, but I could see someone thinking that.  One would hope that wasn't the case in a sovereign debt issue though.  It would be interesting to see how domestic issues of debt in Argentina work - though given their governance track record I wouldn't be surprised that they didn't even bother - you got what the government says you got, so they didn't know enough to include the right parameters in the 1990s.
 
2014-07-31 04:36:27 PM  

Intrepid00: Moopy Mac: Why do all of these Latin American countries have such an acrimonious relationship with the USA? Is there some sort of history between the two groups that is related to short term decision making by the US intelligence community that had very negative long term effects on the security of the United States?

Maybe that's the excuse, but really it's classic misdirection


It works because people in Latin America can remember more than 15 years in the past. The historical boogie man isn't made up, it was very real and now it is a convenient crutch. Ignoring that reality is not constructive.
 
2014-07-31 04:42:25 PM  

MadHatter500: Moopy Mac: Why do all of these Latin American countries have such an acrimonious relationship with the USA? Is there some sort of history between the two groups that is related to short term decision making by the US intelligence community that had very negative long term effects on the security of the United States?

Check out "gunboat diplomacy" some time.  Also Monroe Doctrine.  US intelligence community issues with foreign governments are step towards better relationships in comparison to what came before.

Tapping phones and sniffing all their packets is weak sauce in comparison to what was done on behalf of United Fruit.  The relationship between the US and other countries in the Americas has been unbalanced since the early 1800s.


Yeah, that's what I'm talking about. The USA was knocking off governments well into the 80s. Now we probably aren't, but are you going to blame Venezuelans for thinking there may be some truth when the Chavistas throw out some some anti-American/Imperialistic propaganda?

Who do you think was behind Guatemala or Argentina or Chile or El Salvador? The US intelligence community.

But thanks for dropping the Monroe Doctrine. That isn't taught in 5th grade history or anything.
 
2014-07-31 04:49:16 PM  

Moopy Mac: Intrepid00: Moopy Mac: Why do all of these Latin American countries have such an acrimonious relationship with the USA? Is there some sort of history between the two groups that is related to short term decision making by the US intelligence community that had very negative long term effects on the security of the United States?

Maybe that's the excuse, but really it's classic misdirection

It works because people in Latin America can remember more than 15 years in the past. The historical boogie man isn't made up, it was very real and now it is a convenient crutch. Ignoring that reality is not constructive.


biatch ask your want but Latin America could learn a thing from Ghana.
 
2014-07-31 04:50:40 PM  

Intrepid00: Moopy Mac: Intrepid00: Moopy Mac: Why do all of these Latin American countries have such an acrimonious relationship with the USA? Is there some sort of history between the two groups that is related to short term decision making by the US intelligence community that had very negative long term effects on the security of the United States?

Maybe that's the excuse, but really it's classic misdirection

It works because people in Latin America can remember more than 15 years in the past. The historical boogie man isn't made up, it was very real and now it is a convenient crutch. Ignoring that reality is not constructive.

biatch ask your want but Latin America could learn a thing from Ghana.


Lol, what.

biatch all you want but Latin America should take lessons from Ghana. Maybe they would stop being so piss poor and poorly ran.
 
2014-07-31 06:38:22 PM  

MugzyBrown: mcreadyblue:
 The restructure agreement was the best way to avoid an even worse bankruptcy. A restructure like this is a fairly common way to handle the problem.
Now, those holdout bondholders somehow think they can demand full value for those bonds, plus any interest for amounts that are overdue.
This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this. If this stands, countries will not be able to restructure their debt because bondholders will refuse, and instead would be forced into outright bankruptcy that wil ...


These New York-issued bonds of the 1990s had two other important features besides being issued under New York legal jurisdiction. The incorporation of the  paripassu clause and the absence of the  collective action clause. The  paripassu clause holds that Argentina agrees to treat all creditors on equal terms (especially regarding payments of coupons and capital). The  collective action clausestates that in the case of a debt restructuring, if a certain percentage of creditors accept the debt swap, then creditors who turn down the offer (the "holdouts") automatically must accept the new bonds. However, when Argentina defaulted on its bonds at the end of 2001, it did so with bonds that included the  paripassu clause but which did  not require collective action by creditors.

Under the contract that Argentina itself offered to its creditors, which did not include thecollective action clause, any creditor is entitled to receive 100 percent of the bonus even if 99.9 percent of the creditors decided to enter a debt swap. And this is precisely what happened with the 2001 default. When Argentina offered new bonds to its creditors following the default, the "holdouts" let Argentina know that under the contract of Argentine bonds, they still have the right to receive 100 percent of the bonds under "equality of conditions" (paripassu)with those who accepted the restructuring. That is, Argentina cannot pay the "holdins" without paying the "holdouts" according to the terms of the debt.


This exactly. The BS is being spewed by Argentina, not the bond holders, who have every legal right to the money lent to Argentina.
 
2014-07-31 08:07:38 PM  
Chris45215:

This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this.

You seem, by your amazement, to claim that you know how government bonds work.

Since you're such an expert, would you please give some examples of bonds that allows the issuer to pay what they feel like without repercussions?
 
2014-07-31 08:11:11 PM  
Satanic_Hamster:
And, again, it's even more bs then that; the original bond holders basically through these bonds in the trash.  The current bond holders are just zombie debt collectors.

No they obviously didn't. Well, it seems obvious to me, but maybe its not so obvious since you're confused.

They sold them for more than Argentina was offering.
 
2014-07-31 08:34:40 PM  

spawn73: Satanic_Hamster:
And, again, it's even more bs then that; the original bond holders basically through these bonds in the trash.  The current bond holders are just zombie debt collectors.

No they obviously didn't. Well, it seems obvious to me, but maybe its not so obvious since you're confused.

They sold them for more than Argentina was offering.


You pay money for web browsers.
 
2014-07-31 11:09:43 PM  

spawn73: Chris45215:

This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this.

You seem, by your amazement, to claim that you know how government bonds work.

Since you're such an expert, would you please give some examples of bonds that allows the issuer to pay what they feel like without repercussions?


I do indeed have a decent sense of how bonds work. There are many variations, but I'll stick with the simplest type, and will start with the basics so that any other readers can easily follow.

Every country that issues bonds pays what it wants to, and repercussions are built in. This process actually happens on the other side of the transaction - when the transaction starts, rather than when it ends. Lets suppose you are an investor buying bonds. A country offers to pay you $1000 in 10 years (a very common amount and timeframe), if you loan that country money. You obviously won't lend them $1000 because you would make no profit; but if you lent them $500, you would double your money by collecting the $1000 at the end of the 10 years. If the country is a risky bet, your offer might be the best one available and they'll take it. If the country is stable, they could probably borrow $900 or $950 from someone else for the same promise of $1000 in 10 years. The $1000 is called the "face value" of the bond, because that's the amount printed on the paper (back when bonds were on paper) - they amount paid for the bond in the first place usually is not printed on the bond. And the country can decline to sell the bonds if it believes that it should receive more money than offered.

If a country refuses to pay up at the end of the 10 years, the repercussion is that future investors will be less willing to lend money. They might offer only $300 or $400 for the same promise of $1000. In extreme cases, investors will consider the risk so great that they will not make any offer at all - it would just add more debt that the country cannot repay.

So, the repercussion takes effect in the next round of borrowing, rather than as a punishment for a prior round. Individuals in the US have a somewhat similar system in personal loans with credit scores - a change in the person's credit score increases their cost of borrowing in the future; it does not increase the amount that they pay on a mortgage that was signed years before. Consumer loans (or at least credit cards) have fees added for lack of payment, which is an oddity compared to other types of loans, but the credit card companies were able to do that by claiming that the fees were needed to recoup their own costs (*roll your eyes here*). But for other loan types, people understand that if a borrower cannot repay, there is no use in suddenly requiring them to pay even more.

The interesting part, to me at least, is that the market doesn't have the almighty memory that the vulture lenders claim it has. Investors go for the greatest profit with the lowest risk. A country that defaulted last year could be a safe investment this year, it depends only on that country's economy at the moment it sells the bonds. Some investors may have a "fool me once" approach, but really the majority see it only as numbers and calculations.


Also interesting in this case is that If Argentina is able to get out of this mess without paying, then most investors will consider it to be a SAFER investment and will offer Argentina more loans at a better rate. This is because all the investors who are not completely vultures believe that the vulture's claims are invalid and shouldn't be honored anyway (hence why the vulture was able to buy the bonds for pennies on the dollar), so they would not be scared off if these bonds are not paid. And if Argentina doesn't make this payment, it not only saves the 1.5 billion asked, but also the tens of billions it would be required to pay to the other holdouts who are not part of the case, and quite likely $200+ billion that it would have to pay to all the original bondholders who settled. These payments are a huge risk that investors need to consider.
Argentina just doesn't have that much money, and a debt like that would bankrupt the country for generations, and probably forever - its economy would be destroyed so it wont have income, and the interest payments will accumulate faster than Argentina could ever hope to repay. If this was a real possibility - investors refusing a restructuring or normal bankruptcy process - no country would ever borrow money, and the entire global economy would suffer horribly.

Bankruptcy and loan restructuring exists to avoid this catastrophe, and the interest rate or premium is the price that borrowers pay to have the option of defaulting. Otherwise, all bonds would be inflation-adjusted and sold at exactly face value - and that wouldn't be interesting or profitable for anyone.
 
2014-07-31 11:53:50 PM  

Chris45215: spawn73: Chris45215:

This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this.

You seem, by your amazement, to claim that you know how government bonds work.

Since you're such an expert, would you please give some examples of bonds that allows the issuer to pay what they feel like without repercussions?

I do indeed have a decent sense of how bonds work. There are many variations, but I'll stick with the simplest type, and will start with the basics so that any other readers can easily follow.

Every country that issues bonds pays what it wants to, and repercussions are built in. This process actually happens on the other side of the transaction - when the transaction starts, rather than when it ends. Lets suppose you are an investor buying bonds. A country offers to pay you $1000 in 10 years (a very common amount and timeframe), if you loan that country money. You obviously won't lend them $1000 because you would make no profit; but if you lent them $500, you would double your money by collecting the $1000 at the end of the 10 years. If the country is a risky bet, your offer might be the best one available and they'll take it. If the country is stable, they could probably borrow $900 or $950 from someone else for the same promise of $1000 in 10 years. The $1000 is called the "face value" of the bond, because that's the amount printed on the paper (back when bonds were on paper) - they amount paid for the bond in the first place usually is not printed on the bond. And the country can decline to sell the bonds if it believes that it should receive more money than offered.

If a country refuses to pay up at the end of the 10 years, the repercussion is that future investors will be less willing to lend money. They might offer only $300 or $400 for the same promise of $1000. In extreme cases, investors will consider the risk so great that they will not make any offer at all - it would just add more debt that the country cannot rep ...


That was an interesting read, and indeed how I understand how bonds work.

But the shorter version is, no, you couldn't provide any examples. There's no bonds issued by nations, that doesn't involve the nation going into default should they not honour the interest rate.
 
2014-08-01 01:43:40 AM  

spawn73: Chris45215: spawn73: Chris45215:

This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this.

You seem, by your amazement, to claim that you know how government bonds work.

Since you're such an expert, would you please give some examples of bonds that allows the issuer to pay what they feel like without repercussions?

I do indeed have a decent sense of how bonds work. There are many variations, but I'll stick with the simplest type, and will start with the basics so that any other readers can easily follow.

Every country that issues bonds pays what it wants to, and repercussions are built in. This process actually happens on the other side of the transaction - when the transaction starts, rather than when it ends. Lets suppose you are an investor buying bonds. A country offers to pay you $1000 in 10 years (a very common amount and timeframe), if you loan that country money. You obviously won't lend them $1000 because you would make no profit; but if you lent them $500, you would double your money by collecting the $1000 at the end of the 10 years. If the country is a risky bet, your offer might be the best one available and they'll take it. If the country is stable, they could probably borrow $900 or $950 from someone else for the same promise of $1000 in 10 years. The $1000 is called the "face value" of the bond, because that's the amount printed on the paper (back when bonds were on paper) - they amount paid for the bond in the first place usually is not printed on the bond. And the country can decline to sell the bonds if it believes that it should receive more money than offered.

If a country refuses to pay up at the end of the 10 years, the repercussion is that future investors will be less willing to lend money. They might offer only $300 or $400 for the same promise of $1000. In extreme cases, investors will consider the risk so great that they will not make any offer at all - it would just add more debt that the country cannot rep ...

That was an interesting read, and indeed how I understand how bonds work.

But the shorter version is, no, you couldn't provide any examples. There's no bonds issued by nations, that doesn't involve the nation going into default should they not honour the interest rate.


Many countries have defaulted on their bonds. Many of them have restructured - which is the process that you claim i cant provide an example of. Well its happened 18 times since 1998 according to the IMF, including Ukraine and Russia in 1998, Uruguay in 2003, the Dominican Republic in 2005, and Jamaica in 2010.

My point is that both parties know that default is an option. The option is built into the system accordingly. Defaulting on the bonds isnt a violation of the rules - defaulting is a statement that the game now will use the different rules made specially for this occasion.
If we compare this to personal finance, any mortgage borrower has an option to be late on their payments or make no payments at all. These options generally result in financial penalties, damage to the credit score, and possible repossesion of the house if an agreement cannot be reached. These options are written into the mortgage contract.

Also, Argentina already went into default, and restructured 92% of the bonds at that time. These bonds in question have been in default for years, and the vulture investors who own them missed the boat to join the restructuring. That's how the system works. You cant squeze blood from a stone no matter how hard you squeeze it, and you cant drain money from a country that doesnt have any money left.
 
2014-08-01 02:34:27 AM  

Chris45215: spawn73: Chris45215: spawn73: Chris45215:

This claim is total BS, and Im amazed that Argentina had bonds that allow holdouts to do this.

You seem, by your amazement, to claim that you know how government bonds work.

Since you're such an expert, would you please give some examples of bonds that allows the issuer to pay what they feel like without repercussions?

I do indeed have a decent sense of how bonds work. There are many variations, but I'll stick with the simplest type, and will start with the basics so that any other readers can easily follow.

Every country that issues bonds pays what it wants to, and repercussions are built in. This process actually happens on the other side of the transaction - when the transaction starts, rather than when it ends. Lets suppose you are an investor buying bonds. A country offers to pay you $1000 in 10 years (a very common amount and timeframe), if you loan that country money. You obviously won't lend them $1000 because you would make no profit; but if you lent them $500, you would double your money by collecting the $1000 at the end of the 10 years. If the country is a risky bet, your offer might be the best one available and they'll take it. If the country is stable, they could probably borrow $900 or $950 from someone else for the same promise of $1000 in 10 years. The $1000 is called the "face value" of the bond, because that's the amount printed on the paper (back when bonds were on paper) - they amount paid for the bond in the first place usually is not printed on the bond. And the country can decline to sell the bonds if it believes that it should receive more money than offered.

If a country refuses to pay up at the end of the 10 years, the repercussion is that future investors will be less willing to lend money. They might offer only $300 or $400 for the same promise of $1000. In extreme cases, investors will consider the risk so great that they will not make any offer at all - it would just add more debt that t ...


So you don't know how bonds work.
 
2014-08-01 10:48:49 AM  

genner:


So... they found tiberium in Argentina?
 
Displayed 47 of 47 comments

View Voting Results: Smartest and Funniest


This thread is archived, and closed to new comments.

Continue Farking
Submit a Link »
Advertisement
On Twitter






In Other Media


  1. Links are submitted by members of the Fark community.

  2. When community members submit a link, they also write a custom headline for the story.

  3. Other Farkers comment on the links. This is the number of comments. Click here to read them.

  4. Click here to submit a link.

Report