Swap ye not Argentine bonds DECLARED that for the avoidance of doubt (i) the implementation of the plan to allow Exchange Bonds to be exchanged for securities or similar instruments payable in Argentina, which was announced by President Fernandez de Kirchner in her speech of August 26, 2013, (ii) implementation of any functionally equivalent or reasonably similar plan, or (iii) any step towards implementing (including without limitation the formulation or design of) such a plan or a functionally equivalent or reasonably similar plan, each would violate the Anti­ Evasion Injunction of the March 5 Order and Paragraph 2 of this ORDER... Yes, the pari passu saga has flamed into life once more, from its torpor of waiting for the Supreme Court to say something (anything) about whether it will take the case.... Judge Thomas P Griesa has come down very hard on the idea of Argentina swapping its restructured bonds out of New York law into local law, in order to avoid paying holdouts alongside them. We're just surprised Thursday's order didn't come sooner. The US District Court judge made his order "for the avoidance of doubt" - Judge Griesa has had lots of occasions before to deal with Argentina's evasiveness - but there are a couple of interesting details here. 1) Judge Griesa's confirmed that there's actually been an order in this case requiring Argentina not to do this kind of swap ever since March 2012. There was a little bit of legalistic kerfuffle about whether this was true when Argentina made its intentions clear in August, and it wasn't mere hair-splitting. The issue was also whether this bit of the March order had been stayed by the Second Circuit, alongside the actual order to pay holdouts the next time a restructured payment came due. So it's nice to have this cleared up. It's not so nice for Argentina of course - they're now under a firm obligation from US courts not to carry out a restructuring into local law. But there's also something else interesting here. Despite its intransigence which has so clearly annoyed Griesa, the stay on making the ratable payment still hasn't been lifted. That's very important, in that without the stay, Argentina couldn't avoid paying holdouts unless it was quite willing to default on restructured debt. Which it seems it would be willing to. It's well within the holdouts" rights to seek to have the stay lifted later on of course, precisely because of attempted workarounds by Argentina. And equally, they might not succeed in getting it lifted. But we probably have to wait and see there. 2) Restructured bondholders can't really breathe easy however, because this order puts them on the spot quite directly. Could the holdouts seek to have legal action taken against restructured bondholders for taking apart in the swap? (Or advising Argentina on carrying out the swap, let's say. It would be a complicated operation, and it may not be evident that Argentina would even easily know whom its bondholders were.) This question has been floating around the case ever since Argentina started badly losing - almost a year ago or so now, since the first Second Circuit decision - and talk of a local-law swap started. Since the August 26 plan, we had heard that bondholders were getting more confident about their legal security in tendering bonds. This seemed pretty reckless. The holdouts had never explicitly said that they considered restructured bondholders outside any requirement not to frustrate ratable payment. The piece of law here (on helping with evasion of an injunction) is Rule 65 (d) of the Federal Rules of Civil Procedure, and it's fairly formidable. Anyway, as of this order, it would seem really reckless. Judge Griesa has also now ordered Argentina to divulge "the existence and content of any communications between the Republic... and: (i) any holders of beneficial interests in the Exchange Bonds or any registered owners of the Exchange Bonds." While you can wonder about compliance or challenge to that, it clearly shows interest in what the restructured holders are doing. 3) One last thing however - a local-law swap isn't the only operation that Argentina announced after the Second Circuit finally ruled in favour of ratable payment. It also reopened its past restructuring terms to acceptance by the holdouts, which involved suspending the "padlock law" which forbids this. Long story. Here's the structure of a likely reopening, in chart form via Exotix this week (click to enlarge): Supposedly, this was to demonstrate good faith to the courts - see, we are willing to talk to holdouts! - even though Second Circuit judges had just said that the past restructuring terms weren't enough to satisfy the holdout claims. More cynically, it could be an opportunity for Argentina to whittle down some less determined holdouts, either to make it easier to go on resisting Elliott, or actually, to make it cheaper to eventually settle with them. At any rate - Judge Griesa doesn't seem nearly half as bothered by the reopening as by making the restructured bonds "payable in Argentina." Which is perhaps interesting if you keep that notion of an eventual settlement in mind... So, will Argentina carry on with the swap with all this on its back, or on the back of anyone taking its offer? Well - we'd note that all's been relatively silent on this of late actually, even though the law enabling the swap has been on the books for some time. So maybe Argentina is treading carefully anyway. On the other hand, that's probably what people were thinking just after August's Second Circuit defeat, and before President CFK got up to speak on August 26...