By Jason Bedford, independent consultant

Many of the risks surrounding China’s trust sector have been misunderstood and consequently overstated. The Rmb3bn ($495m) China Credit Trust (CCT) product that was rescued at the 11th hour late last month was far from typical of trust products in general – and neither was its potential default new news; it first defaulted in 2012.

Some market watchers saw the CCT scare as a “Lehman Brothers moment” for China that was narrowly averted, but could strike again in a different guise. They may be disappointed. Those trying to understand the risks from China’s shadow financing need to put the trust sector into a more sober context. 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 »

By Samantha Pearson and Pan Kwan Yuk

It’s the end of an era for Brazil’s Eike Batista – the end of charming investors with dazzling oil forecasts, the end of being the poster boy for Brazil’s economic promise and perhaps even the end of parking his sports car in his living room.

Batista’s oil company OGX finally filed for bankruptcy protection on Wednesday, triggering Latin America’s largest ever corporate default. 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 »

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 »

Asia’s riskier borrowers are feeling the strain of slowing exports and lower commodity prices, which are weakening cash flows and pushing some towards downgrades or defaults, according to Moody’s.

Increasing attention is already focused on cash-flow issues in big chunks of corporate China, as we noted last week, but the rating agency on Thursday also said that broader Asia and Indonesia especially were seeing stress levels rise. Continue reading »

When countries crash, does it pay to sue? It’s a timely question, with Greece still poised in the balance. Experience in Argentina suggests that accepting – even with a brutal haircut – may end up being more in the money in the long run.

As this Bloomberg story shows, creditors who accepted Argentina’s first debt swap in 2005, four years after its default on nearly $100bn of sovereign debt, and kept their swapped bonds ever since have enjoyed returns of 90 per cent – outpacing a 70-per cent return on emerging-market bonds overall. That’s a sweet recompense for having accepted just 30 cents on the dollar for their investments. Continue reading »