Not everything is foreign debt: what are the other millionaire maturities that the Government may have to pay

The Argentine Republic never disappoints since it always finds a way to generate events that disturb investors. Although with the recent debt restructuring, the country’s commitments with its international creditors were mostly postponed until 2024, the proximity of sentences of cases initiated by investors in debt in default and by multinationals whose investments were expropriated or saw contracts rescinded by the government, keeps investors on their toes.

Argentina rarely wins an international arbitration. According to court documents and government filings with the SEC, since the beginning of the century, the country has lost more than 95% of all cases filed in the US, the ICSID (World Bank) and the United Nations Commission for Commercial Law International (United Nations). Argentina has paid USD 17.4 billion in compensation with almost USD 10 billion of pending and ongoing disputes, all with probable adverse judgments before 2024.

Argentina rarely wins an international arbitration. According to court documents and government filings with the SEC, since the beginning of the century, the country has lost more than 95% of all cases filed

The issuance of new debt has been the preferred payment method to settle resolutions. The State has paid the plaintiffs with dollar-denominated bonds or has issued new international debt to settle judgments in cash. However, reopening outstanding bond issues to pay for future failures will not be welcomed by current holders of restructured bonds, and since few investors trust Argentina’s creditworthiness, the issuance of new short-term debt is out of the question.

Argentina is already negotiating final judgment settlements for USD 590 million with final settlements expected in 2021 and no money set aside in the current budget.

Possible rulings cast doubt on Argentina’s ability to pay

Few things in life seem as certain as death, taxes and that Argentina usually loses international litigation. Evidence is not difficult to find, especially when the country’s reckless interpretation of international law has proven to be very costly for taxpayers. Time and time again, governments have ignored agreements signed with creditors and multinational corporations, which, in turn, have filed numerous lawsuits to recoup financial losses and capital on defaulted bonds.

Debt and other possible maturities 

According to a government filing with the SEC in August 2020, the Republic is currently facing potential adverse rulings of $ 9.3 billion that continue to grow day by day. Although the sovereign was able to close a handful of cases in 2020 without known monetary compensation, new claims and interest payments on unresolved disputes continue to pile up.

In the last ten years, Argentina has paid USD 17.4 billion in compensation to creditors of non-restructured debt and to multinationals whose investments were expropriated or had signed contracts terminated by the government. These judgments were paid with bonds denominated in dollars according to the laws of New York and Argentina or with cash generated by the issuance of new bonds.

According to a government filing with the SEC in August 2020, the Republic is currently facing potential adverse rulings of $ 9.3 billion that continue to grow day by day

Most of the ongoing cases are expected to receive a final ruling before the country makes its first principal payment on the new restructured bonds in 2024.

Key assumptions and facts:

– Debt in Default: Argentina has USD 831.9 million in adverse judgments related to cases initiated by holders of unchanged defaulted debt in 2005 and 2010. Of this amount, Argentina has already agreed to pay USD 294.4 million to Attestor Master Value, Trinity Investments and Bainbridge Fund . Those payments are expected to be made during the first quarter of this year.

– PBI Coupon: The Republic has $ 1.2 billion in claims filed in New York and London by holders of the Warrants. A lower court decision is expected during the first half of 2021 and an appeals court decision in 2022. If Argentina loses these cases, payment should be made during the second half of next year.

– United Nations I: Argentina currently has two cases with an adverse judgment pending resolution in the United Nations Commission for International Trade Law. The total amount owed to the plaintiffs is $ 7.5 million. We expect the payment to occur in the first semester.

Thomas Griesa, late judge of the Southern District of New York 

– United Nations II: Argentina has a case with an adverse ruling in the process of completing an agreement negotiated at the United Nations Commission for International Trade Law for a total of USD 200.7 million. That payment could happen before June.

– Expropriation of YPF: The sovereign has a multi-million dollar lawsuit filed in the Southern District Court of New York related to the expropriation of YPF in 2012. The expected recovery value according to Burford Capital, part owner of the case, ranges between USD 1.2 billion and USD 9 billion. This case and a similar one presented by Eton Park Capital are valued at USD 4.4 billion. If the judge rules against Argentina, the payment would have to be made in the second half of 2020.

– CIADI I: Argentina has six cases with an adverse judgment pending resolution at ICSID for a total of USD 804 million. Payment: possibly in the first quarter of next year.

– CIADI II: The Republic faces USD 1.6 billion lawsuits in five ongoing cases at ICSID. If Argentina loses these cases, no payments are expected until 2024.

For Argentina, history always repeats itself

When Argentina receives a court ruling ordering the government to pay damages to creditors or corporations, it will face three familiar alternatives that the sovereign has faced in the recent past.

According to government records filed with the SEC, Argentina has settled judgments with (1) sovereign bonds, (2) cash generated from new bond issues, or (3) defied the courts and saw assets seized by the plaintiffs. The most notable examples include a payment with bonds in dollars in Argentine Law for USD 5,000 million in 2014 to the Spanish Repsol after the expropriation of YPF, a cash payment of USD 10,000 million to creditors (holdouts), and a court order for the seizure of the Libertad Frigate in Ghana in 2012.

Precautionary measures are also possible on all international debt payments similar to those ordered in 2014 by the late Judge Griesa. Argentina’s notable inability or unwillingness to pay judgments may once again lead to a US court ordering new injunctions on all interest and principal payments in the not too distant future.

Today, Argentina is in a desperate situation and does not have the necessary dollars to solve the next court decisions.

The possibility of a repeat of 2014 does not seem so far-fetched, as the same government that defied various US court orders in the past is currently in power and Argentina, once again, does not have enough dollars to resolve cases.