And it is that Val details that this is because, although the restructuring of the 2001 default was closed in 2016 with the arrangement with the Vulture fundsthe truth is that some lawsuits from holders of securities not exchanged in 2005, 2010, 2016 and 2020 they continue to have force in the courts of New York. “Thus, as of September 2022, the total debt pending restructuring amounted to US$2,317,218,000,” reports the expert.
What is the process like and how feasible is it to be applied?
That is why, as pointed out by the economist Federico Glustein, “judge Preska orordered to seize Argentina for US$400 million and, although the country appealed some of the orders of the North American authority, there would be millions of dollars more in funds that they seek to collect through a sentence, than at some point in 2023 they could be executed”.
Apparently, in this case where various funds participateand seeks the embargo of the brady warranties linked to the non-restructured bonds in order to ensure collection when they and the bonds reach maturity. However, as Ámbito learned, this is unlikely because the Brady funds would not be seizable.
What are Brady funds? Val details that, when the bank debt in arrears was restructured for its conversion into negotiable public securities, when Argentina entered the Brady plan in 1992implied that the debtor countries and the government of Carlos Menem made guarantees to ensure collection from creditors.
For this purpose they were chosen mostly US treasury bonds 30-year “zero coupon”, that is, securities that do not pay interest periodically, but rather accumulate yields during their maturity, after which they are redeemed. As of September 2022, they appear in the Fiscal Bulletin as financial assets linked to the debt pending restructuring of US$312,310. 000 of Brady plan guarantees, describes the sovereign debt specialist.
Pressure or reality?: This is how the embargo can affect the economy
So, how serious is the embargo ordered by the New York judge? Val assesses that “the embargo seems to involve more than sheer pressureas happened during the vulture saga (in the time of Judge Griesa), during which numerous State assets linked to diplomatic tasks, the BCRA reserves and even the Brady guarantees were subject to seizure orders that could never be substantiated”.
And it is that, as pointed out, “Brady funds are not seizable and neither are BCRA reserves”, says a source, which is why, in these cases, the vultures use the embargoes as an element of pressure in their search for a favorable agreement.
Likewise, on the other hand, Glustein points out that these funds belong to the Treasury, but considers that the amount is not very high and the resources are in New York, so it would not be an essential element for the public accounts at this time, in his opinion.
And it is understandable about the pressures taking into account that, at present, in addition to the fact that the possibility of payment by agreement is made difficult by the delicate situation in Argentina, the Brady bond maturity is approaching. Therefore, for Val, “the action of the plaintiffs makes sense to ensure payment with the guarantee funds before their economic rights to collection are extinguished.”
He adds that, in previous situations, heThe embargoes could not materialize for different reasons, but mainly due to the non-commercial nature of the activities of the Argentine State to which they were linked.
Thus, it ensures that, “in this case, it will be necessary to see if the Argentine representatives before Judge Preska can allege the same, since the guarantees were from the beginning linked to the issuance of bonds, which is considered a commercial activity for the law of New York, even if it is carried out by a sovereign State”.
For the moment, according to the information circulating, the seizure order would allow priority to be given to plaintiffs who have a final collection judgment to obtain the funds when these guarantees are redeemed. But Val assesses that the center of the problem for the government, today, “is the timing and the ‘reasonableness’ of this strategy of the litigants, which seems to be validated by the judge.” Now, it will be necessary to see what available options Argentina has to prevent the embargo and face these judicial decisions.