Rejoice, you good people: another holdout creditor who refused Argentina’s restructured debt proposals back in 2005 and 2010 has accepted the US$6.5 billion settlement offer presented on February 5.
Three down, three more to go.
In this way, Brecher has become the third out of six holdout creditors to accept the country’s offer, thus joining Montreux Partners and Dart Management to the “awesome holdout club (patent pending).” 50,000 Italian bondholders with whom there’s a pre-agreement might soon join as well, but NML Capital and Aurelius, the funds who have been the most belligerent in the court room, have rejected the offer.
Special Master (fancy term for mediator) Daniel Pollack made the announcement yesterday in a press release, explaining that the settlement with the Brecher Class Action calls for “payment of 100 percent of the principal and 50 percent interest on the principal for each class member.”
Argentina’s US$6.5 billion offer represents a 25 percent reduction from the US$9 billion total the holdouts were initially asking for. The hope is that all of the holdout creditors, or vulture funds as they’re lovingly called here, will accept the offer and finally put an end to the endless debt negotiation that has been going on ever since Argentina famously defaulted on its international debt in 2001.
However, as Pollack explained in his statement, two important developments have yet to take place before we can all get our final settlement party hats on and celebrate like it’s 1999. Or 2001. Take your pick. First, the Argentine Congress has to approve the settlement offer and consequently lift the Lock Law and Sovereign Payment Law that prevent the country from paying the holdouts more than the restructured 2005 and 2010 debts. And second, Judge Thomas Griesa has to lift the injunction that prevents Argentina from paying other debt payments.
Griesa has already done his due diligence regarding the latter. On February 12, he ordered the holdouts to justify why the country should continue to be blocked from paying other debt payments now that it has presented them an offer. Even though this is considered to be pretty procedural stuff, it is encouraging to see that things are moving and that now, after a long time, the holdouts are the ones who have to justify their actions. Maybe I’m just a dreamer but you know, we might actually live to see the day where we don’t see the words “vulture funds” in every other article on Argentine news.
Finally, as per usual, here’s a little background on the whole issue: After Argentina’s economic meltdown in 2001, the country defaulted on its international debt. A group of creditors purchased some of the defaulted bonds and refused to accept debt restructuring plans in 2005 and 2010 that would have exchanged the original bonds for bonds worth 30 cents on the dollar, insisting instead the debt be repaid in full. Hence former President Cristina Fernández de Kirchner’s nickname for them, “vultures.” She also swore that Argentina would “never” pay. Judge Griesa consistently ruled in the holdouts’ favor and Argentina is now faced with negotiating the payment.