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You might say that it is a "technicality", but it is the contract the government of Argentina agreed to. The only thing you have with a financial arrangement o

You might say that it is a "technicality", but it is the contract the government of Argentina agreed to. The only thing you have with a financial arrangement of this magnitude is the contract. It is perfectly reasonable for the creditors to do all they can to get paid. It isn't a failure of their risk management, because they probably figured this was risky all along. If Argentina didn't want the bonds to be subject to the US legal system, they shouldn't have issued them governed by NY state law. They could also have included clauses preventing holdouts, but they didn't. In hindsight, they clearly made mistakes issuing the debt, but that doesn't mean they should get off without paying for the consequences of those mistakes.

lmm 12y ago
I think even with a financial arrangement of this magnitude there's a place for considering what's fair and equitable. Maybe there were mistakes in the contracts, but the overwhelming majority of bondholders are willing to be reasonable - it's the few holdouts who are wrecking it for everyone.
- PeterisP 12y ago
  At this magnitude there aren't "mistakes in the contracts" - every provision, by including or excluding it, meaningfully affects the price of that bond. Just like in insurance contracts - if you buy a policy for $123 that covers A, B and C but excludes D and E, then you don't get to argue if C should be fairly excluded or D should be fairly included - if the contract would've been different, then the price would've been different, and you got the price that matched the exact terms as written, not some other terms. Bondholders may reasonably have conflicting interests - for example, if some bondholders have significant other investments in that country, then they have motivations to settle cheaply that would conflict with other bondholders, and it's not fair if those other bondholders get less of their debt back. If you sell a bond whose terms that includes specific protection against that (the lack of provision that minorities would have to agree if majority restructures), then it's not reasonable to withdraw that protection afterward; a bond with slightly different terms is a completely different bond, even if the amounts match. In serious contracts, expecting "take-backsies" isn't reasonable; either term X is in the contract or it isn't - that's what the exact agreement was, and not the other way.

lmm 12y ago

I think even with a financial arrangement of this magnitude there's a place for considering what's fair and equitable. Maybe there were mistakes in the contracts, but the overwhelming majority of bondholders are willing to be reasonable - it's the few holdouts who are wrecking it for everyone.

PeterisP 12y ago
At this magnitude there aren't "mistakes in the contracts" - every provision, by including or excluding it, meaningfully affects the price of that bond. Just like in insurance contracts - if you buy a policy for $123 that covers A, B and C but excludes D and E, then you don't get to argue if C should be fairly excluded or D should be fairly included - if the contract would've been different, then the price would've been different, and you got the price that matched the exact terms as written, not some other terms. Bondholders may reasonably have conflicting interests - for example, if some bondholders have significant other investments in that country, then they have motivations to settle cheaply that would conflict with other bondholders, and it's not fair if those other bondholders get less of their debt back. If you sell a bond whose terms that includes specific protection against that (the lack of provision that minorities would have to agree if majority restructures), then it's not reasonable to withdraw that protection afterward; a bond with slightly different terms is a completely different bond, even if the amounts match. In serious contracts, expecting "take-backsies" isn't reasonable; either term X is in the contract or it isn't - that's what the exact agreement was, and not the other way.