Argentina loses U.S. appeal in $1.33 billion bondholder fight

By Nate Raymond and Jonathan Stempel

NEW YORK | Fri Aug 23, 2013 5:57pm EDT

NEW YORK (Reuters) - Argentina on Friday lost its appeal of a U.S. court order requiring it to pay $1.33 billion to hedge funds that refused to accept steep discounts when the nation restructured its debt.

The decision by the 2nd U.S. Circuit Court of Appeals in New York is the latest in a standoff between U.S. courts and the Argentine government that some investors fear could lead Argentina to default. The court stayed the decision pending review by the U.S. Supreme Court, giving Argentina a reprieve and nervous investors some relief.

While Argentina and its supporters have said a ruling against it could threaten future sovereign debt restructurings, the court said the case was an "exceptional one" that would have little impact on future transactions.

The court also had harsh words for the government of Argentine President Cristina Fernandez, which has called the hedge funds vultures and vowed not to pay them.

"Argentina's officials have publicly and repeatedly announced their intention to defy any rulings of this Court and the district court with which they disagree," Circuit Judge Barrington Parker wrote for a three-judge appeals panel.

Argentina did not comment on the decision on Friday. Economy Minister Hernan Lorenzino, asked about the decision during a trip to Chile, declined to comment.

The case stems from Argentina's $100 billion default on its debt in 2001. In two subsequent restructurings, in 2005 and 2010, creditors holding about 93 percent of the debt received 25 cents to 29 cents on the dollar.

Dissident bondholders led by the hedge funds NML Capital Ltd, which is a unit of Paul Singer's Elliott Management Corp, and Aurelius Capital Management refused to go along with the restructurings, arguing in court that they should be paid in full.

The case came to a head in November 2012, when U.S. District Judge Thomas Griesa in New York ordered Argentina to pay $1.33 billion into a court-controlled escrow account for the dissident bondholders.

He also ordered Argentina not to pay its other bondholders without making the payment, raising the prospect that Argentina could go into default.

The U.S. Supreme Court starts its new term in October and, if it agrees to take the case, may not rule until the next June.

Initially, investors in Argentine assets breathed a sigh of relief, but by the end of the day the Merval index .MERV of Argentine blue chips had closed lower.

For the longer term, investors signaled continued worries.

The cost to protect $10 million of Argentine sovereign debt against default for five years rose to $2.53 million annually from $2.28 million on Thursday, according to Markit. The cost suggests that many investors consider it likely the debt will go into default.

"The court's decision against Argentina is what we have been expecting," said Stuart Culverhouse, head of research at Exotix in London. "Market disappointment may be tempered though by the continuation of the stay with the Supreme Court appeal."

In the decision, Parker wrote that the court believed "it is equitable for one creditor to receive what it bargained for, and is therefore entitled to, even if other creditors, when receiving what they bargained for, do not receive the same thing.

"Because the district court's decision does no more than hold Argentina to its contractual obligation of equal treatment, we see no abuse of discretion," Parker added.

'NOT ABOUT THE LAW'

Friday's ruling rejected Argentina's arguments that the order to pay the holdout bondholders would unjustly hurt itself, participants in the bond payment system and the public.

It also rejected a claim by bondholders who agreed to the restructuring that Griesa's ruling would prevent them from being paid, based on Argentina's refusal to pay the holdouts.

"This type of harm - harm threatened to third parties by a party subject to an injunction who avows not to obey it - does not make an otherwise lawful injunction 'inequitable,'" Parker wrote.

Sean O'Shea, a lawyer for a group of bondholders including Gramercy Funds Management LLC who participated in the debt restructuring, said the opinion "unfortunately glosses over" the impact on his clients.

But Theodore Olson, a lawyer for NML, one of the dissident hedge funds, said the ruling "confirms that Argentina is not above the law."

At times, Friday's ruling reflected seeming frustration of the court with Argentina.

Parker said that in light of the "unusual nature of this litigation," the court had invited Argentina to propose an alternative payment formula that it was willing to commit. Argentina put forward "no productive proposals," he wrote.

The opinion quoted Jonathan Blackman, Argentina's lawyer, as even telling the court during arguments that the country "would not voluntarily obey" Griesa's injunctions if they were upheld.

NEXT STOP: SUPREME COURT

Argentina has already sought Supreme Court review of a ruling by the 2nd Circuit in October last year that Argentina had broken a contractual obligation to treat bondholders equally. A footnote to Friday's ruling suggested that the Supreme Court justices may wait instead for an appeal from the more recent decision.

That would delay the high court taking action on the appeal, although it could still potentially decide the case by the end of the court's next term, which starts in October and runs until June 2014.

Resolution of the case could be delayed further if the justices ask the Obama administration to weigh on whether they should hear the case. Then, the court might not rule on the case, if it decides to hear it, until the term that starts in October 2014.

In Friday's ruling, the 2nd Circuit also said that New York's status as a financial center depended on enforcing the ruling.

"We believe that the interest - one widely shared in the financial community - in maintaining New York's status as one of the foremost commercial centers is advanced by requiring debtors, including foreign debtors, to pay their debts," Parker wrote.

The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.

(Additional reporting by Hugh Bronstein in Buenos Aires and Lawrence Hurley in Washington; Editing by Eddie Evans, Dan Grebler and Bernard Orr)

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Argentina loses U.S. appeal in $1.33 billion bondholder fight

By Nate Raymond and Jonathan Stempel

NEW YORK | Fri Aug 23, 2013 5:57pm EDT

NEW YORK (Reuters) - Argentina on Friday lost its appeal of a U.S. court order requiring it to pay $1.33 billion to hedge funds that refused to accept steep discounts when the nation restructured its debt.

The decision by the 2nd U.S. Circuit Court of Appeals in New York is the latest in a standoff between U.S. courts and the Argentine government that some investors fear could lead Argentina to default. The court stayed the decision pending review by the U.S. Supreme Court, giving Argentina a reprieve and nervous investors some relief.

While Argentina and its supporters have said a ruling against it could threaten future sovereign debt restructurings, the court said the case was an "exceptional one" that would have little impact on future transactions.

The court also had harsh words for the government of Argentine President Cristina Fernandez, which has called the hedge funds vultures and vowed not to pay them.

"Argentina's officials have publicly and repeatedly announced their intention to defy any rulings of this Court and the district court with which they disagree," Circuit Judge Barrington Parker wrote for a three-judge appeals panel.

Argentina did not comment on the decision on Friday. Economy Minister Hernan Lorenzino, asked about the decision during a trip to Chile, declined to comment.

The case stems from Argentina's $100 billion default on its debt in 2001. In two subsequent restructurings, in 2005 and 2010, creditors holding about 93 percent of the debt received 25 cents to 29 cents on the dollar.

Dissident bondholders led by the hedge funds NML Capital Ltd, which is a unit of Paul Singer's Elliott Management Corp, and Aurelius Capital Management refused to go along with the restructurings, arguing in court that they should be paid in full.

The case came to a head in November 2012, when U.S. District Judge Thomas Griesa in New York ordered Argentina to pay $1.33 billion into a court-controlled escrow account for the dissident bondholders.

He also ordered Argentina not to pay its other bondholders without making the payment, raising the prospect that Argentina could go into default.

The U.S. Supreme Court starts its new term in October and, if it agrees to take the case, may not rule until the next June.

Initially, investors in Argentine assets breathed a sigh of relief, but by the end of the day the Merval index .MERV of Argentine blue chips had closed lower.

For the longer term, investors signaled continued worries.

The cost to protect $10 million of Argentine sovereign debt against default for five years rose to $2.53 million annually from $2.28 million on Thursday, according to Markit. The cost suggests that many investors consider it likely the debt will go into default.

"The court's decision against Argentina is what we have been expecting," said Stuart Culverhouse, head of research at Exotix in London. "Market disappointment may be tempered though by the continuation of the stay with the Supreme Court appeal."

In the decision, Parker wrote that the court believed "it is equitable for one creditor to receive what it bargained for, and is therefore entitled to, even if other creditors, when receiving what they bargained for, do not receive the same thing.

"Because the district court's decision does no more than hold Argentina to its contractual obligation of equal treatment, we see no abuse of discretion," Parker added.

'NOT ABOUT THE LAW'

Friday's ruling rejected Argentina's arguments that the order to pay the holdout bondholders would unjustly hurt itself, participants in the bond payment system and the public.

It also rejected a claim by bondholders who agreed to the restructuring that Griesa's ruling would prevent them from being paid, based on Argentina's refusal to pay the holdouts.

"This type of harm - harm threatened to third parties by a party subject to an injunction who avows not to obey it - does not make an otherwise lawful injunction 'inequitable,'" Parker wrote.

Sean O'Shea, a lawyer for a group of bondholders including Gramercy Funds Management LLC who participated in the debt restructuring, said the opinion "unfortunately glosses over" the impact on his clients.

But Theodore Olson, a lawyer for NML, one of the dissident hedge funds, said the ruling "confirms that Argentina is not above the law."

At times, Friday's ruling reflected seeming frustration of the court with Argentina.

Parker said that in light of the "unusual nature of this litigation," the court had invited Argentina to propose an alternative payment formula that it was willing to commit. Argentina put forward "no productive proposals," he wrote.

The opinion quoted Jonathan Blackman, Argentina's lawyer, as even telling the court during arguments that the country "would not voluntarily obey" Griesa's injunctions if they were upheld.

NEXT STOP: SUPREME COURT

Argentina has already sought Supreme Court review of a ruling by the 2nd Circuit in October last year that Argentina had broken a contractual obligation to treat bondholders equally. A footnote to Friday's ruling suggested that the Supreme Court justices may wait instead for an appeal from the more recent decision.

That would delay the high court taking action on the appeal, although it could still potentially decide the case by the end of the court's next term, which starts in October and runs until June 2014.

Resolution of the case could be delayed further if the justices ask the Obama administration to weigh on whether they should hear the case. Then, the court might not rule on the case, if it decides to hear it, until the term that starts in October 2014.

In Friday's ruling, the 2nd Circuit also said that New York's status as a financial center depended on enforcing the ruling.

"We believe that the interest - one widely shared in the financial community - in maintaining New York's status as one of the foremost commercial centers is advanced by requiring debtors, including foreign debtors, to pay their debts," Parker wrote.

The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.

(Additional reporting by Hugh Bronstein in Buenos Aires and Lawrence Hurley in Washington; Editing by Eddie Evans, Dan Grebler and Bernard Orr)

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At least one bid qualified for $7.4 billion South Korea fighter jet deal

1 of 2. Members of the honor guard from the South Korean armed forces lead an annual military parade in Chuncheon, northeast of Seoul June 21, 2013.

Credit: Reuters/Lee Jae-Won

SEOUL | Fri Aug 16, 2013 4:44am EDT

SEOUL (Reuters) - South Korea said on Friday that at least one bid came in under budget for its 8.3 trillion Korean won ($7.42 billion) purchase of 60 next generation fighter jets, the country's biggest-ever defense import program to replace its ageing fleet.

A spokesman at the government's Defense Acquisition Program Administration (DAPA) said at a briefing that a comprehensive evaluation would start and that a winner was expected to be chosen in mid-September.

DAPA resumed the bidding this week after suspending the process in July due to price gaps.

Lockheed Martin Corp's F-35, Boeing Co's F-15 and EADS's Eurofighter Typhoon are in the race.

Spokesman Baek Youn-hyeong declined to give the number or name of the companies that had submitted the required price.

"A qualified company that came under the total project budget will be selected finally," Baek said.

South Korea had originally aimed to pick a winner by October 2012, but last year's presidential election and criticism that the government had rushed matters slowed the process.

Analysts say the government is unlikely to meet the planned first delivery date of 2017.

The program seeks to partially replace some 150 ageing F-4 and F-5 jets that South Korea plans to retire starting in 2015.

(Reporting by Ju-min Park and Joyce Lee; Editing by Himani Sarkar)

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South Korea says at least one qualifying bid in $7.4 billion fighter deal

BF-3, a short take-off and vertical landing F-35 Lightning II, releases an inert 1,000 lb.

Credit: Reuters/Andy Wolfe/Lockheed Martin/Handout

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India's Lanco Infra starts process to restructure $1.3 billion debt

By Neha Dasgupta

MUMBAI (Reuters) - India's Lanco Infratech Ltd has started a process to restructure debts totaling 75 billion rupees ($1.3 billion) after economic weakness impacted the performance of some of its businesses such as power and engineering and construction.

If the process is approved by its lenders, Lanco would be the second debt-laden company to go for a major loan restructuring within nine months, after lenders to wind turbine maker Suzlon Energy in November agreed to restructure about 110 billion rupees of its debt.

Lanco, which produces power, builds roads and constructs residential and commercial buildings, has asked banks to restructure the debt, a company statement said on Saturday.

The Business Standard newspaper earlier said Lanco had started discussion with its bankers to restructure debt worth 90 billion rupees.

The company, which acquired Australia's Griffin Coal Mining Co for about $760 million in 2011, said the debt restructuring would involve Lanco Infratech as a standalone unit and would not impact any of its units including the Australian business.

Banks bring cases to the so-called corporate debt restructuring process to negotiate relaxed repayment terms with struggling borrowers.

Many lenders have expressed worry about loans to the power, commercial real estate, construction, aviation, textile and metals sectors, which are among those hardest-hit by slowing growth and sluggish policymaking that has deterred investment.

"The current adverse macro-economic situation that has been prevailing in India since last 12 months has affected the performance of LITL's EPC business as well as the subsidiary business," the company said referring to the engineering, procurement and construction business.

"We expect this situation to remain for another 18 to 24 months time," it said, adding the restructuring process will help Lanco to complete its ongoing projects on time.

Lanco, which had total debt of 336 billion rupees as of the end of March, posted losses in the last two financial years, as the weak Indian economy, growing at its slowest in a decade, hit infrastructure investment.

Project bottlenecks, largely because of problems in acquiring land, and high funding costs, have also sapped investment in the infrastructure industry in Asia's third-largest economy.

(Writing by Sumeet Chatterjee; Editing by Robert Birsel and David Holmes)

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India's Lanco Infra starts process to restructure $1.3 billion debt

By Neha Dasgupta

MUMBAI (Reuters) - India's Lanco Infratech Ltd has started a process to restructure debts totaling 75 billion rupees ($1.3 billion) after economic weakness impacted the performance of some of its businesses such as power and engineering and construction.

If the process is approved by its lenders, Lanco would be the second debt-laden company to go for a major loan restructuring within nine months, after lenders to wind turbine maker Suzlon Energy in November agreed to restructure about 110 billion rupees of its debt.

Lanco, which produces power, builds roads and constructs residential and commercial buildings, has asked banks to restructure the debt, a company statement said on Saturday.

The Business Standard newspaper earlier said Lanco had started discussion with its bankers to restructure debt worth 90 billion rupees.

The company, which acquired Australia's Griffin Coal Mining Co for about $760 million in 2011, said the debt restructuring would involve Lanco Infratech as a standalone unit and would not impact any of its units including the Australian business.

Banks bring cases to the so-called corporate debt restructuring process to negotiate relaxed repayment terms with struggling borrowers.

Many lenders have expressed worry about loans to the power, commercial real estate, construction, aviation, textile and metals sectors, which are among those hardest-hit by slowing growth and sluggish policymaking that has deterred investment.

"The current adverse macro-economic situation that has been prevailing in India since last 12 months has affected the performance of LITL's EPC business as well as the subsidiary business," the company said referring to the engineering, procurement and construction business.

"We expect this situation to remain for another 18 to 24 months time," it said, adding the restructuring process will help Lanco to complete its ongoing projects on time.

Lanco, which had total debt of 336 billion rupees as of the end of March, posted losses in the last two financial years, as the weak Indian economy, growing at its slowest in a decade, hit infrastructure investment.

Project bottlenecks, largely because of problems in acquiring land, and high funding costs, have also sapped investment in the infrastructure industry in Asia's third-largest economy.

(Writing by Sumeet Chatterjee; Editing by Robert Birsel and David Holmes)

View the original article here