UPDATE 1-Argentina posts 3 pct growth in 2013, dodges GDP warrant bullet

Thu Mar 27, 2014 5:42pm EDT

(Adds context, analyst quotes)

By Hugh Bronstein and Alejandro Lifschitz

BUENOS AIRES, March 27 (Reuters) - Argentina said on Thursday its gross domestic product expanded 3.0 percent last year, below the 3.22 percent level that would have triggered about $3.5 billion in payments to holders of GDP bond warrants.

Warrants trading in the secondary debt market fell up to 13.7 percent after the government announced the figure.

Economy Minister Axel Kicillof said the 2013 growth data was calculated using 2004 as the base year, rather than 1993.

"Three percent growth is still very good considering the international context, which was complicated," Kicillof said.

If the government had used 1993 as the base, growth would have come in at 5.1 percent, triggering costly payments to warrant holders.

"The decision to make such a large revision to the GDP data confirms concerns about manipulation of the country's macroeconomic data," said Walter Molano, emerging markets analyst at U.S.-based BCP Securities.

But Siobhan Morden, New York-based head of Latin American strategy at Jefferies LLC, said the 3 percent growth figure is closer to the estimates of private economists than what it would have been under the previous base year.

"The pros versus cons argued in favor of downward revision of GDP growth to align with private sector estimates of 2.9 to 3.0 percent," Morden said.

Argentina issued GDP warrants, payable if growth in Latin America's No. 3 economy exceeds pre-set yearly levels, as part of debt restructurings that were negotiated in 2005 and 2010.

The bond revampings followed the country's 2002 sovereign default, which triggered an economic meltdown that pushed millions of middle-class Argentines into poverty.

More recently the country had been censured by the International Monetary Fund for publishing inaccurate economic data.

In January the Argentine government unveiled a new consumer price index. So far it has clocked inflation at a rate much closer to the estimates of private economists, who see prices soaring more than 30 percent higher per year.

Argentina's finances are still feeling the strain of having been cut off from the international capital markets since 2002. Loose fiscal policy has fueled one of the world's highest inflation rates while heavy-handed currency controls damage business confidence by cutting off access to U.S. dollars.

Moody's Investors Service earlier this month cut Argentina's government bond rating further into junk, saying a sharp drop in the central bank's dollar reserves has raised concerns about the country's ability to service its remaining foreign debt.

Reserves are down 33 percent over the past year to $27.1 billion. (Editing by G Crosse)

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Comments (3)
Errata wrote:
Argentina’s economic statistics are invariably false, and curiously contrived to be favourable to the corrupt current administration. You need look no further than the Peronist presidenta and her Marxist economy minister, Axel Kicillof.

Mar 28, 2014 8:27am EDT  --  Report as abuse
GermanHoldout wrote:
YES!! Instead of PBI payment, Argentina should end this HORROR-Default with holdouts!!

Now we, holdouts, are off!

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

With the money for the PBI payments (3-4 billions), Argentina could almost to half solve the holdout problem and end this HORROR-DEFAULT.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

Dear President Kirchner, please stop this HORROR-WAR (it lasts already longer, than the World War I and II together) against innocent holdouts. We are human beings and not scapegoat of the politics!!

Dear President Obama, can You please help and talk to President Kirchner to end Argentina’s Horror-Default.

Instead of PBI payment, Argentina should end this HORROR-Default with holdouts!!

With the money for the PBI (3-4 billions), Argentina could almost to
half solve the holdout problem and end this HORROR-DEFAULT.

The outstanding debt to the Holdouts is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

It is shameful, that countries such as Mexico, Brazil, France and a Nobel laureate Joseph Stiglitz support this incredible injustice of the non-payment of debts to the holdouts with hair-raising justifications in their amicus briefs.

In the “Pari Passu” issue the Holdouts are 100% right! There is nothing to discuss. In the bond contracts “Pari Passu” is clear defined. Also, in the bond contracts Argentina has explicitly waived its sovereign immunity.

It would be helpful, if the US Supreme Court promptly rejected Argentina’s unjustified appeal.

The argument:->
“If the U.S. courts uphold the Holdout’s position, as negative consequences Sovereign debt restructurings will be much more difficult and expensive in the future.”
IS NOT TRUE because, after Argentina’s 2001 Default all bonds imply the Collective Action Clause (CAC) A collective Action clause (CAC) allows a supermajority of bondholders (75%) to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring.

Also the new swapped bonds of the “exchanged bondholders“ include this CAC. It means that in the future Argentina can swap with a majority of 75%.

BUT, this CAC is NOT implied in Argentina’s old bonds, which the Holdouts have!
Accordingly, Argentina MUST fulfill the bond contracts and repay the debt to the holdouts!

Also the Argument-> “The country has said that forcing it to pay
the defaulted bondholders immediately would expose it to $43 billion in additional claims it can’t pay and trigger a new default. ”

IS NOT TRUE, because the clause “Rights Upon Future Offers (RUFO)” ends in December 2014. That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010. Hence, additional Claims from Exchange bondholders are completely ruled out.

Argentina should rather sit down and negotiate an acceptable solution with the Holdouts!

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!

Argentina should solve not only the Repsol and Paris Club but also the Holdout Problem!

We are in contrast to Repsol and Paris Club human beings!

To reach an agreement with the holdouts would probably take only few hours…

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

President Obama should help and talk to President Kirchner to end
Argentina’s Horror-Default.

President Kirchner (by the way a beautiful women) should end this since´2002 ongoing HORROR-Default and solve the holdout Problem NOW!

The cause of Argentina’s decline is the largest financial crime in world history, this since 2002 ongoing HORROR-Default.

U.S. Senators Rubio and Menendez meant under undemocratic Argentina, that Argentina does not pay its debt.

Non-payment of debt since 2002 to the Holdouts, breaching of bond-contracts are criminal and are highly undemocratic!

Argentina as a great country must reenter the world!

For reentering the world, Argentina must end this HORROR-Default!

Beyond the U.S. Hedge Funds there are still tens of thousands retail
Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even higher. That is why we cannot accept similar offers as they were in 2005 and 2010. Most of the “Exchange Bondholders” were “after default buyer”, who have bought their bonds at an average of 30% or even lower. That is why they have accepted the offers in 2005 or 2010.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

The “Lock Law” ends as of 12/31/2014. (End of the “Rights Upon Future Offers (RUFO) clause in December 2014.) That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010.

If Argentina and the holdouts made NOW A BINDING AGREEMENT with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO) clause in December 2014), seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.

Holdouts want a simple, clear, secure and an ACCEPTABLE solution.

Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc., and with maturities in the eternity. Such “shares like” financial constructs are inacceptable.

A swap from the defaulted old bonds to new bonds is unacceptable also for tax reasons. In Germany, for example, if you accepted a swap, then you would have to pay for the new bonds 30% extra tax…

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds.(Without swapping from old to new bonds, also because of tax reason)

– at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

– For the accrued interest between 2002-2015 Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Mar 28, 2014 11:13am EDT  --  Report as abuse
GermanHoldout wrote:
Update

GDP warrants are really a casino game. For normal bondholders, who invested in government bonds, are such types of papers unacceptable.

Instead of PBI payment, Argentina should end finally this HORROR-Default with holdouts!!

Now we, the holdouts, are off!

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

With the money for the PBI payments (3-4 billions), Argentina could almost to half solve the holdout problem and end this HORROR-DEFAULT.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

Dear President Kirchner, please stop this HORROR-WAR (it lasts already longer, than the World War I and II together) against innocent holdouts. We are human beings and not scapegoat of the politics!!

Dear President Obama, can You please help and talk to President Kirchner to end Argentina’s Horror-Default.

Instead of PBI payment, Argentina should end this HORROR-Default with holdouts!!

With the money for the PBI (3-4 billions), Argentina could almost to
half solve the holdout problem and end this HORROR-DEFAULT.

The outstanding debt to the Holdouts is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

It is shameful, that countries such as Mexico, Brazil, France and a Nobel laureate Joseph Stiglitz support this incredible injustice of the non-payment of debts to the holdouts with hair-raising justifications in their amicus briefs.

In the “Pari Passu” issue the Holdouts are 100% right! There is nothing to discuss. In the bond contracts “Pari Passu” is clear defined. Also, in the bond contracts Argentina has explicitly waived its sovereign immunity.

It would be helpful, if the US Supreme Court promptly rejected Argentina’s unjustified appeal.

The argument:->
“If the U.S. courts uphold the Holdout’s position, as negative consequences Sovereign debt restructurings will be much more difficult and expensive in the future.”
IS NOT TRUE because, after Argentina’s 2001 Default all bonds imply the Collective Action Clause (CAC) A collective Action clause (CAC) allows a supermajority of bondholders (75%) to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring.

Also the new swapped bonds of the “exchanged bondholders“ include this CAC. It means that in the future Argentina can swap with a majority of 75%.

BUT, this CAC is NOT implied in Argentina’s old bonds, which the Holdouts have!
Accordingly, Argentina MUST fulfill the bond contracts and repay the debt to the holdouts!

Also the Argument-> “The country has said that forcing it to pay
the defaulted bondholders immediately would expose it to $43 billion in additional claims it can’t pay and trigger a new default. ”

IS NOT TRUE, because the clause “Rights Upon Future Offers (RUFO)” ends in December 2014. That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010. Hence, additional Claims from Exchange bondholders are completely ruled out.

Argentina should rather sit down and negotiate an acceptable solution with the Holdouts!

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!

Argentina should solve not only the Repsol and Paris Club but also the Holdout Problem!

We are in contrast to Repsol and Paris Club human beings!

To reach an agreement with the holdouts would probably take only few hours…

President Kirchner (by the way a beautiful women) should end this since´2002 ongoing HORROR-Default and solve the holdout Problem NOW!

The cause of Argentina’s decline is the largest financial crime in world history, this since 2002 ongoing HORROR-Default.

U.S. Senators Rubio and Menendez meant under undemocratic Argentina, that Argentina does not pay its debt.

Non-payment of debt since 2002 to the Holdouts, breaching of bond-contracts are criminal and are highly undemocratic!

Argentina as a great country must reenter the world!

For reentering the world, Argentina must end this HORROR-Default!

Beyond the U.S. Hedge Funds there are still tens of thousands retail
Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even higher. That is why we cannot accept similar offers as they were in 2005 and 2010. Most of the “Exchange Bondholders” were “after default buyer”, who have bought their bonds at an average of 30% or even lower. That is why they have accepted the offers in 2005 or 2010.

The “RUFO” clause (Rights Upon Future Offers) expires as of 12/31/2014. That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010.
If Argentina and the holdouts made NOW A BINDING AGREEMENT with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO) clause in December 2014), seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.

Holdouts want a simple, clear, secure and an ACCEPTABLE solution.

Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc., and with maturities in the eternity. Such “shares like” financial constructs are inacceptable.

A swap from the defaulted old bonds to new bonds is unacceptable also for tax reasons. In Germany, for example, if you accepted a swap, then you would have to pay for the new bonds 30% extra tax…

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds.(Without swapping from old to new bonds, also because of tax reason)

– at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

– For the accrued interest between 2002-2015 Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Mar 29, 2014 5:10am EDT  --  Report as abuse
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