4 ms·

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 Ame

by blowski 12y ago

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 it stands, though, it's easy to portray this as the US bullying Argentina in the interests of a small group of rich American citizens who behave like loan sharks. It just seems like it would be better to have an international body of law under which all international lending takes place, and when there is a dispute, a judge is chosen from an independent third party. Is there any serious effort to make that happen? I have no idea.

pessimizer 12y ago
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 saying that the decision must be unanimous. That's completely unworkable.
- blowski 12y ago
  I actually downvoted you because the world `holdup` made it sound a bit inflammatory. Having read the links, I see where you're coming from, and changed to an upvote. This is certainly one of those topics that sensationalists will try to reduce to easy answers, when it's clear there aren't any.
  - pessimizer 12y ago
    http://www.cepr.net/index.php/blogs/the-americas-blog/argentina-vs-the-vultures-what-you-need-to-know http://www.cepr.net/index.php/blogs/the-americas-blog/argent... Here's another link. edit: and another - http://www.forbes.com/sites/realspin/2013/12/19/the-real-facts-on-argentinas-sovereign-debt-restructuring-a-rebuttal/ http://www.forbes.com/sites/realspin/2013/12/19/the-real-fac...
  - chimeracoder 12y ago
    > Having read the links, I see where you're coming from, and changed to an upvote. How do you change a vote on HN? Any time I upvote or downvote, both arrows disappear, so I always assumed they were permanent.
    - blowski 12y ago
      Good point. I thought I did - perhaps I'm thinking I'm on StackOverflow. I thought I clicked 'back' so the arrows were there. I don't remember. Even if I haven't actually changed it to an upvote, then it deserves it.
      - pessimizer 12y ago
        It doesn't matter:) I've got plenty of internet points; I just appreciate your thoughtful replies.
- smackfu 12y ago
  It's a difficult situation because a lot of these bonds have been resold at a steep discount. Someone who paid ten cents on the dollar for a bond has much different financial incentives than I may have as an original buyer... should the fact that there are more of them mean they can screw me over?
  - rahimnathwani 12y ago
    Why should the price I paid for the bond give me different incentives? It's only the future cash flows scenarios which are relevant to my decision-making. What I paid is a sunk cost, and doesn't affect my possible actions or payoffs in the future. (I'm assuming that I wasn't bankrupted due to the price I paid, and that I am a professional investor rather than an emotional gambler)
  - estebank 12y ago
    Well, not passing judgement for or against, but these holdouts _also_ bought the bonds at less than face value.
- rahimnathwani 12y ago
  There _is_ reason to issue your bonds in the US (e.g. governed by New York law). Investors trust that the bond contract will be honoured because, if not, it's likely to be enforced by the courts.
- PeterisP 12y ago
  Well no, if we estabilish what you say, then we've only found out that US jurisdiction is friendly to creditors and less friendly to debtors, and nothing else. It doesn't mean that there's no reason to issue your bonds in the US, on the contrary - it means that if you have a debt-reputation problem but feel safe in your ability to repay, then you'll want to issue your bonds in US to 'put your money where your mouth is' and get a better price. Or, in cases like Argentina, the potential investors will say 'either US jurisdiction or no deal'.
- berns 12y ago
  Judge Griesa decision shouldn't be solomonic. He decides based on a contract. His role is not to favour one part or the other.The percentage of bondholder that accepted the restructuring is irrelevant. Also, something that is not usually mentioned is that an appeals court upheld the judge's decision.
- bradleyjg 12y ago
  >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.
davidw 12y ago
A portion of the bondholders who had renegotiated their debts are from the US too, and are now wondering what's going to happen.
- pessimizer 12y ago
  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 means that this is going to be a full default, and nobody's getting a dime, right?
  - blowski 12y ago
    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?
    - PeterisP 12y ago
      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.
      - blowski 12y ago
        > 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.

by blowski 12y ago

pessimizer 12y ago

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 saying that the decision must be unanimous. That's completely unworkable.

blowski 12y ago
I actually downvoted you because the world `holdup` made it sound a bit inflammatory. Having read the links, I see where you're coming from, and changed to an upvote. This is certainly one of those topics that sensationalists will try to reduce to easy answers, when it's clear there aren't any.
- pessimizer 12y ago
  http://www.cepr.net/index.php/blogs/the-americas-blog/argentina-vs-the-vultures-what-you-need-to-know http://www.cepr.net/index.php/blogs/the-americas-blog/argent... Here's another link. edit: and another - http://www.forbes.com/sites/realspin/2013/12/19/the-real-facts-on-argentinas-sovereign-debt-restructuring-a-rebuttal/ http://www.forbes.com/sites/realspin/2013/12/19/the-real-fac...
- chimeracoder 12y ago
  > Having read the links, I see where you're coming from, and changed to an upvote. How do you change a vote on HN? Any time I upvote or downvote, both arrows disappear, so I always assumed they were permanent.
  - blowski 12y ago
    Good point. I thought I did - perhaps I'm thinking I'm on StackOverflow. I thought I clicked 'back' so the arrows were there. I don't remember. Even if I haven't actually changed it to an upvote, then it deserves it.
    - pessimizer 12y ago
      It doesn't matter:) I've got plenty of internet points; I just appreciate your thoughtful replies.
smackfu 12y ago
It's a difficult situation because a lot of these bonds have been resold at a steep discount. Someone who paid ten cents on the dollar for a bond has much different financial incentives than I may have as an original buyer... should the fact that there are more of them mean they can screw me over?
- rahimnathwani 12y ago
  Why should the price I paid for the bond give me different incentives? It's only the future cash flows scenarios which are relevant to my decision-making. What I paid is a sunk cost, and doesn't affect my possible actions or payoffs in the future. (I'm assuming that I wasn't bankrupted due to the price I paid, and that I am a professional investor rather than an emotional gambler)
- estebank 12y ago
  Well, not passing judgement for or against, but these holdouts _also_ bought the bonds at less than face value.
rahimnathwani 12y ago
There _is_ reason to issue your bonds in the US (e.g. governed by New York law). Investors trust that the bond contract will be honoured because, if not, it's likely to be enforced by the courts.
PeterisP 12y ago
Well no, if we estabilish what you say, then we've only found out that US jurisdiction is friendly to creditors and less friendly to debtors, and nothing else. It doesn't mean that there's no reason to issue your bonds in the US, on the contrary - it means that if you have a debt-reputation problem but feel safe in your ability to repay, then you'll want to issue your bonds in US to 'put your money where your mouth is' and get a better price. Or, in cases like Argentina, the potential investors will say 'either US jurisdiction or no deal'.
berns 12y ago
Judge Griesa decision shouldn't be solomonic. He decides based on a contract. His role is not to favour one part or the other.The percentage of bondholder that accepted the restructuring is irrelevant. Also, something that is not usually mentioned is that an appeals court upheld the judge's decision.
bradleyjg 12y ago
>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.

davidw 12y ago

A portion of the bondholders who had renegotiated their debts are from the US too, and are now wondering what's going to happen.

pessimizer 12y ago
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 means that this is going to be a full default, and nobody's getting a dime, right?
- blowski 12y ago
  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?
  - PeterisP 12y ago
    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.
    - blowski 12y ago
      > 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.