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‘Vultures’ subpoena HSBC over loans

Economy Minister Alfonso Prat-Gay speaks at a press conference alongside Finance Secretary Luis Caputo in a file photo.

Elliott, Aurelius seek documents over country’s plan to get US$5B from foreign banks

With talks looming, the “vulture” funds are keeping up the pressure on the country by demanding HSBC bank provide information about Economy Minister Alfonso Prat-Gay’s attempt to raise more than US$5 billion through foreign banks.

Holdouts led by Elliott Management and Aurelius Capital Management served HSBC with a subpoena for documents on the bank’s involvement in Argentina’s plan to get cash to boost the Central Bank’s foreign currency reserves, a source close to the negotiations told Bloomberg yesterday.

International banks — including HSBC, JP Morgan, Goldman Sachs, Deutsche Bank, Citibank, Santander and BBVA — are on the verge of lending the country at least US$5 billion at an annual interest rate of seven percent, after meetings held by Finance Secretary Luis Caputo in New York with bank representatives.

Nevertheless, getting hold of the funds won’t come as easy as planned because the “vultures” are trying to find out whether the loan would violate United States District Judge Thomas Griesa’s order limiting the country’s capacity to raise money offshore. Holdouts may serve other banks with subpoenas as well, the same source told Bloomberg.

The move is similar to the previous attempt by the holdouts at the beginning of the year to gather information from Deutsche Bank about US$1.4 billion worth in Bonar 2024 bonds issued by Argentina, denominated in US dollars but governed by Argentine law.

Elliott and Aurelius wanted Griesa to consider the bonds as external debt, an argument rejected by the government. They argued that marketing international investors qualified the Bonar sale as international making it fall under the order, which blocks payments until the holdouts are repaid.

Nevertheless, that wouldn’t be the case with the new loans, Caputo said in a recent press conference, as the financing will be arranged in the local market and shouldn’t violate United States court orders that keep Argentina from servicing its foreign-law debt. Caputo reportedly spoke with banks about backing loans with sovereign debt owned by the Central Bank, which would be repaid by the monetary authority in a year.

Getting access to such a loan would be an important aid to the Central Bank’s foreign-currency reserves, which stand at a nine-year low of US$25.2 billion. Reserves rose US$202 million yesterday and although the sum continues to be low it has been gradually increasing over the past few weeks, surpassing the US$25 billion mark.

Upcoming negotiations

While the holdouts are trying to block the country’s ability to raise money offshore and force it to comply with Griesa’s order to repay defaulted debt, Caputo is getting ready to open talks with them. He has already travelled twice to New York since Macri’s presidential win to meet with Special Master Daniel Pollack and discuss the upcoming negotiations.

The court-appointed mediator issued a press release after the meeting, which he described as “constructive,” and said “substantive negotiations” between the holdouts and the government would start in the second week of January.

Sources close to the “vultures” told La Nación daily yesterday that they remained sceptical about the new round of negotiations and rejected the government’s attempt to hire new lawyers for the litigation. They wouldn’t back granting Argentina a new stay until a deal is closed.

The talks would mark a major breakthrough in the dispute, which has kept Argentina largely shut out of international capital markets. Macri and his team have long said that settling the debt issue with the holdout bondholders, often referred to as “vulture” funds, would be a priority for his administration.

Griesa raised the country’s bill with the “vulture” funds to around US$8 billion in October after he agreed that holders of US$6.1 billion of defaulted bonds must also receive payment when the country services restructured debt. The figure adds up to the US$1.33 billion, plus interest, granted initially to NML and Aurelius.

Herald with Reuters, Bloomberg

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