bond defaults

By Samuel George of the Bertelsmann Foundation

On February 18 the Republic of Argentina submitted a petition to the US Supreme Court requesting a judicial review of a 2012 decision from the New York Second Circuit Court. That ruling found illegal Argentine payments on restructured sovereign debt if the country did not also service investors who had not accepted the haircut on the non-performing bonds.

If the Second Circuit Court ruling stands, it will set a precedent that holdouts could eventually be paid in full. Bondholders may become increasingly reluctant to accept haircuts on sovereign securities, thus complicating the ability of a distressed country to restructure its debt. Continue reading »

Analysts from Bank of America Merrill Lynch think that China will experience its “Bear Stearns moment” on Friday, when the country will probably see as its first ever bond default.

That is a bold, attention-seeking call that is also patently ridiculous. Continue reading »

By Arturo C. Porzecanski

Carlos Mauleon, the former Barclays Capital investment banker who handled Argentina’s 2005 debt restructuring, recently wrote a guest post on beyondbrics justifying that infamous transaction: “Whatever you may think of Argentina, … the one good decision its leaders made was to aggressively restructure [the public] debt back in 2005” because “the question is, did [Argentina] have a better choice? Not really.”

But it did. Here’s why. Continue reading »

plane2012, as beyondbrics readers know, was a record year for emerging markets bonds. But it turns out it was also a record year for defaults.

According to a new report out from Standard & Poor’s, defaults among EM corporate issuers accounted for about 30 per cent of global corporate defaults by issuer count – the highest in the 16 years since the rating agency started keeping scores. Continue reading »

Things are going from bad to worse for Suntech Power, the Chinese solar panel maker.

The company, which has been fighting to stay afloat amid falling panel prices and slowing demand, became the latest company from mainland China to default on its international bonds. Continue reading »

James K GlassmanBy James K Glassman

As the global economy continues its sputtering recovery, policymakers have an opportunity to take a strong stand on principles that may help mitigate further long-term damage. In particular, as regards Argentina, a relatively small country with a potentially large impact on the international financial system.

For a decade, responsible nations have watched impassively as Argentina has refused to abide by court decisions and flouted global financial norms. Continue reading »

Federico SturzeneggerBy Federico Sturzenegger of Banco Ciudad de Buenos Aires

Last week Judge Griesa ruled that Argentina should pay to a holdout fund by the name of NML before December 15 the full amount of debt owed by the country. The ruling followed a previous one, based on the pari passu clause, which said that Argentina should pay at least something to the holdouts. Continue reading »

There was a time, not long ago – until Wednesday night, to be exact – when investors would pay a premium on emerging market debt subject to New York law. Not any more.

Judge Thomas Griesa’s ruling that Argentina must pay $1.3bn to holdout creditors has all sorts of implications for sovereign borrowers and lenders. It has also, at a stroke, wiped out the New York law premium, as a chart from Vladimir Werning at JP Morgan illustrates. Continue reading »

Argentina’s reaction to Thomas Griesa’s New York court ruling was probably enough to make the octogenarian judge choke on his Thanksgiving turkey.

It was expected that Argentina would promise to fight – but what is surely guaranteed to make the judge’s blood boil was the offended tone Argentina struck. Continue reading »

A hundred years ago if a country was reluctant to pay its debts, gunboats might have steamed to its shores. Since then sovereign immunity has reigned but the latest development in a legal argument over Argentina’s 2001 defaulted debt could shift the balance toward creditors. Whitney Debevoise, former US executive director of the World Bank, explains to capital markets correspondent Robin Wigglesworth the implications of the US court case on sovereign debt markets.

Argentina will have to pay $1.3bn to hedge funds that refused to restructure their debts after the country’s 2001 default when it makes regular payments to its restructured bondholders in December, a US court has ordered.

The ruling, made late on Wednesday in New York, raises the possibility that Argentina will default once more, and if upheld represents a major chink in the armour of sovereign immunity against creditors that has largely reigned in international law for almost a century.

 Continue reading »

Hedge fund 2, Argentina 0.

A court in Ghana has rejected an appeal by Argentina to release the navy vessel ARA Libertad, after the ship was seized last week at the request of NML Capital, a hedge fund. Continue reading »

Cristina Fernández, Argentina’s president (pictured), maintains her government has not “clamped” the dollar, despite imposing a rash of restrictions on greenback purchases in recent months.

Try telling that to the northern province of Chaco. It says it was forced to settle a dollar-denominated bond in pesos because it could not get hold of the dollars to meet the $260,000 payment. Argentine bonds fell 1.3 per cent on Tuesday, the first trading day since Chaco’s weekend announcement (Monday was a holiday in Argentina). Continue reading »

There’s been a lot of water under the bridge since Argentina’s debt default of 2001 but some creditors haven’t given up the fight to get their money back.

ARA Libertad

 Continue reading »

It’s been a good year for emerging markets bonds. Even as investors,  unnerved by the latest in the eurozone debt crisis, continue to pull out of EM equities and EM currencies, appetite for EM bonds shows no sign of abating.

EM bond issues for the first five months of the year are at a record high of $403.2bn according to data provider Dealogic, while fund inflows into the asset class hit $18.4bn for the year to May 2 compared to $5.7bn during the same period last year, according to EPFR data.

But the level of EM bond issuance and the JPMorgan EMBI Global index (which scaled to a new high of 608.7 this month) are not the only indicators in town. A look at the rate of EM bond defaults suggest things are not quite as positive as they might appear. Continue reading »