For the benefit of vulture funds, Judge Griesa continues without resolving anything
Press Release by the Argentine Ministry of Economy and Public Finance
Published on August 1, 2014
Today, another hearing took place in Judge Thomas Griesa’s court. During that meeting, the judge denied Argentina’s request to replace the Special Master Daniel Pollack, who has shown through his last statement an overt bias in favor of the vulture funds. The mediator has largely overstepped his powers and scope of his mandate by qualifying as “default” the inability to collect the payment that Griesa’s same court imposed to some bondholders.
But, in addition, the fact that the Minister of Economy has met with the vulture funds is not Pollack’s merit, but a gesture of good faith by Argentina, in the context of his inability as a mediator to find a solution that doesn’t exclusively benefit the vulture funds. For these reasons, Argentina will reiterate in writing the request to remove the Special Master.
Once again, the judge called for a hearing without resolving absolutely anything with regard to third parties’ funds that he keeps immobilized. In this way, far from keeping the status quo, as the Republic has denounced, he favors the vulture funds, once again, in two ways.
First, by preventing the collection of payments to some of the exchanged bondholders, he attempts to subject Argentina to a true extortion, so that it pays the vulture funds what they seek, even when the judge knows perfectly well that that pretension implies a breach of the Argentine law, as well as the contracts signed with 92.4% of the bondholders who accepted the debt exchange (RUFO clause).
But, secondly, as Argentina also warned, this may be a maneuver so that vulture funds, directly or through other entities, may cash credit default swaps that they themselves have recognized owning.
Indeed, today it was also known that the private association ISDA (International Swaps & Derivatives Association), in which the same vulture funds have participation, gave way to the payment of the credit default swaps for almost US$ 1 billion. Although this does not imply that the Republic has to pay absolutely anything, given that these are transactions among private parties, it does favor some in expense of others and seeks to send the message that Argentina is in default.
However, as Argentina has reiterated, this situation does not constitute, from any point of view, an event of default. In the first place, because in the provisions established in the prospectus, under section 4.1 entitled “Events of default”, none of them refer to a blockage of payment collection by a judge. But, in addition, because in the same prospectus the section related to risk factors contemplates a situation of this type, by giving due notice to the creditors who decided to acquire these securities.
Up to now, the actions taken by the judge reveal that his attitude, far from imparting justice and generating balanced conditions among the parties, seek to favor vulture funds. How is it possible that he delegated in the vulture funds the decision to grant a stay to Argentina, when these same funds could benefit from billionaire profits if they didn’t settle? The saying “both judge and party” has never been better applied. But the worst part is that we would not be facing the practice known as “insider trading information”, internationally condemned by all controller authorities, but an unusual case where one of the parties, with the judge’s help, triggers the events they then benefit from.
Given this potential millionaire scam, the Ministry of Economy has notified the National Securities Commission of Argentina (CNV, in its Spanish acronym) about this situation and has requested an immediate and thorough investigation to determine whether this case isn’t actually the façade of a speculative maneuver to favor vulture funds, intended to benefit from the defaulted bonds they bought at a vile price, but also from the financial derivatives that are paid out when the ISDA association decides so. The CNV will request the SEC accurate information regarding the securities’ transactions, in order to investigate whether the vultures funds themselves, or through third parties, obtained huge benefits by not reaching an agreement.
Link to the original press release of the Ministry of Economy and Public Finance (in Spanish): http://www.mecon.gov.ar/para-beneficiar-a-los-fondos-buitres-el-juez-griesa-sigue-sin-resolver-nada/