<story><title>S.&amp;P. Says Argentina Has Defaulted</title><url>http://dealbook.nytimes.com/2014/07/30/s-p-says-argentina-has-defaulted/</url></story><parent_chain><item><author>pessimizer</author><text>I just edited my comment to double down due to downvotes, but this ruling will ultimately damage the US more than Argentina. If we establish that it will be impossible to restructure debt if you issue your bonds in the US, we&amp;#x27;ve established that there&amp;#x27;s no reason to issue your bonds in the US.&lt;p&gt;edit: it&amp;#x27;s important to keep in mind that 93% of bondholders have agreed to the restructuring. The courts look like they&amp;#x27;re saying that the decision must be unanimous. That&amp;#x27;s completely unworkable.</text></item><item><author>blowski</author><text>I can see both sides here. What surprised me is not that &lt;i&gt;&lt;/i&gt;&lt;i&gt;a&lt;/i&gt;&lt;i&gt;&lt;/i&gt; judge has decided, but that a US judge has decided. It looks like an American judge decided in an American corporation&amp;#x27;s favour, and against a poorer country, to hell with the damage it will do the world&amp;#x27;s economy.&lt;p&gt;On the other hand, if the US doesn&amp;#x27;t uphold the law, then the world economy would be damaged because lending would become more unpredictable.&lt;p&gt;As it stands, though, it&amp;#x27;s easy to portray this as the US   bullying Argentina in the interests of a small group of rich American citizens who behave like loan sharks. It just seems like it would be better to have an international body of law under which all international lending takes place, and when there is a dispute, a judge is chosen from an independent third party. Is there any serious effort to make that happen? I have no idea.</text></item><item><author>pessimizer</author><text>That&amp;#x27;s what it would be like if this were anything but a holdup. The US government is intervening in the market and preventing bondholders who have agreed on a change in rules from receiving their bond payments, rather than letting the market set the prices. That&amp;#x27;s the opposite of what you describe here.&lt;p&gt;edit: What I&amp;#x27;m saying is only crazy within the bubble of this thread. It&amp;#x27;s also the opinion of the US government and the American Bankers Association.&lt;p&gt;&lt;a href=&quot;http://www.bloomberg.com/news/2013-01-04/bankers-group-supports-bond-trustee-in-argentina-appeal-1-.html&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;2013-01-04&amp;#x2F;bankers-group-suppo...&lt;/a&gt;&lt;p&gt;&amp;quot;&amp;#x27;Permitting injunctions against these trustees that preclude them fulfilling their pre-existing obligations whenever expedient to enforce a judgment against the debtor will have significantly adverse consequences for the financial system,&amp;#x27; the ABA said in its brief.&amp;quot;&lt;p&gt;&lt;a href=&quot;http://www.reuters.com/article/2012/12/13/argentina-debt-usa-idUSL1E8NDFJJ20121213&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.reuters.com&amp;#x2F;article&amp;#x2F;2012&amp;#x2F;12&amp;#x2F;13&amp;#x2F;argentina-debt-usa...&lt;/a&gt;&lt;p&gt;&amp;quot;U.S. government lawyers reiterated their position that the court&amp;#x27;s interpretation of the &amp;#x27;equal treatment&amp;#x27; clause in Argentina&amp;#x27;s defaulted bonds &amp;#x27;may adversely affect future voluntary sovereign debt restructurings, the stability of international financial markets, and the repayment of loans extended by international financial institutions.&amp;#x27;&amp;quot;</text></item><item><author>smackfu</author><text>It&amp;#x27;s more like, if you keep defaulting on bonds by saying you don&amp;#x27;t have to pay them because you changed the rules, eventually no on will buy them unless you let someone else set the rules.</text></item><item><author>blowski</author><text>&amp;gt; Argentina issued bonds under New York law.&lt;p&gt;Until I read this, I assumed that international bonds were issued under international law, with the World Bank as the arbitrator. With the US as both lender and arbitrator, it seems to give them a lot of power.</text></item><item><author>sciurus</author><text>To understand background and potential implication, I found &lt;a href=&quot;http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-the-battle-over-argentinas-debt/&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;dealbook.nytimes.com&amp;#x2F;2014&amp;#x2F;07&amp;#x2F;30&amp;#x2F;q-a-whats-behind-the-...&lt;/a&gt; helpful.</text></item></parent_chain><comment><author>bradleyjg</author><text>&amp;gt;I just edited my comment to double down due to downvotes, but this ruling will ultimately damage the US more than Argentina. If we establish that it will be impossible to restructure debt if you issue your bonds in the US, we&amp;#x27;ve established that there&amp;#x27;s no reason to issue your bonds in the US.&lt;p&gt;Every country in the world knows that it is going to be easier to restructure if you issue bonds under local law. No one selects New York law for its bonds out of some naive inertia. Argentina &lt;i&gt;specifically&lt;/i&gt; went out of its way to select New York law and deliberately put in a pari passu clause because it had a history of defaulting on debt, and it thought it wouldn&amp;#x27;t be able to raise money, or at least not at the same rate, if it issued bonds under local law.&lt;p&gt;I can&amp;#x27;t think of any possible reason to relieve a country of obligations that were deliberately and knowingly undertaken to tie its own hands in order to make its debt more credible.&lt;p&gt;If you want collective action on restructured debt put in a collective action clause. If you want a sweetheart interpretation of your debt clauses issue it under local law. Every country that is issuing debt knows these things, they aren&amp;#x27;t rocket science. The reason they sometimes choose not to is because they want to pay a lower coupon and&amp;#x2F;or be sure that the whole issue will be purchased.</text></comment>
<story><title>S.&amp;P. Says Argentina Has Defaulted</title><url>http://dealbook.nytimes.com/2014/07/30/s-p-says-argentina-has-defaulted/</url></story><parent_chain><item><author>pessimizer</author><text>I just edited my comment to double down due to downvotes, but this ruling will ultimately damage the US more than Argentina. If we establish that it will be impossible to restructure debt if you issue your bonds in the US, we&amp;#x27;ve established that there&amp;#x27;s no reason to issue your bonds in the US.&lt;p&gt;edit: it&amp;#x27;s important to keep in mind that 93% of bondholders have agreed to the restructuring. The courts look like they&amp;#x27;re saying that the decision must be unanimous. That&amp;#x27;s completely unworkable.</text></item><item><author>blowski</author><text>I can see both sides here. What surprised me is not that &lt;i&gt;&lt;/i&gt;&lt;i&gt;a&lt;/i&gt;&lt;i&gt;&lt;/i&gt; judge has decided, but that a US judge has decided. It looks like an American judge decided in an American corporation&amp;#x27;s favour, and against a poorer country, to hell with the damage it will do the world&amp;#x27;s economy.&lt;p&gt;On the other hand, if the US doesn&amp;#x27;t uphold the law, then the world economy would be damaged because lending would become more unpredictable.&lt;p&gt;As it stands, though, it&amp;#x27;s easy to portray this as the US   bullying Argentina in the interests of a small group of rich American citizens who behave like loan sharks. It just seems like it would be better to have an international body of law under which all international lending takes place, and when there is a dispute, a judge is chosen from an independent third party. Is there any serious effort to make that happen? I have no idea.</text></item><item><author>pessimizer</author><text>That&amp;#x27;s what it would be like if this were anything but a holdup. The US government is intervening in the market and preventing bondholders who have agreed on a change in rules from receiving their bond payments, rather than letting the market set the prices. That&amp;#x27;s the opposite of what you describe here.&lt;p&gt;edit: What I&amp;#x27;m saying is only crazy within the bubble of this thread. It&amp;#x27;s also the opinion of the US government and the American Bankers Association.&lt;p&gt;&lt;a href=&quot;http://www.bloomberg.com/news/2013-01-04/bankers-group-supports-bond-trustee-in-argentina-appeal-1-.html&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.bloomberg.com&amp;#x2F;news&amp;#x2F;2013-01-04&amp;#x2F;bankers-group-suppo...&lt;/a&gt;&lt;p&gt;&amp;quot;&amp;#x27;Permitting injunctions against these trustees that preclude them fulfilling their pre-existing obligations whenever expedient to enforce a judgment against the debtor will have significantly adverse consequences for the financial system,&amp;#x27; the ABA said in its brief.&amp;quot;&lt;p&gt;&lt;a href=&quot;http://www.reuters.com/article/2012/12/13/argentina-debt-usa-idUSL1E8NDFJJ20121213&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;www.reuters.com&amp;#x2F;article&amp;#x2F;2012&amp;#x2F;12&amp;#x2F;13&amp;#x2F;argentina-debt-usa...&lt;/a&gt;&lt;p&gt;&amp;quot;U.S. government lawyers reiterated their position that the court&amp;#x27;s interpretation of the &amp;#x27;equal treatment&amp;#x27; clause in Argentina&amp;#x27;s defaulted bonds &amp;#x27;may adversely affect future voluntary sovereign debt restructurings, the stability of international financial markets, and the repayment of loans extended by international financial institutions.&amp;#x27;&amp;quot;</text></item><item><author>smackfu</author><text>It&amp;#x27;s more like, if you keep defaulting on bonds by saying you don&amp;#x27;t have to pay them because you changed the rules, eventually no on will buy them unless you let someone else set the rules.</text></item><item><author>blowski</author><text>&amp;gt; Argentina issued bonds under New York law.&lt;p&gt;Until I read this, I assumed that international bonds were issued under international law, with the World Bank as the arbitrator. With the US as both lender and arbitrator, it seems to give them a lot of power.</text></item><item><author>sciurus</author><text>To understand background and potential implication, I found &lt;a href=&quot;http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-the-battle-over-argentinas-debt/&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;dealbook.nytimes.com&amp;#x2F;2014&amp;#x2F;07&amp;#x2F;30&amp;#x2F;q-a-whats-behind-the-...&lt;/a&gt; helpful.</text></item></parent_chain><comment><author>PeterisP</author><text>Well no, if we estabilish what you say, then we&amp;#x27;ve only found out that US jurisdiction is friendly to creditors and less friendly to debtors, and nothing else.&lt;p&gt;It doesn&amp;#x27;t mean that there&amp;#x27;s no reason to issue your bonds in the US, on the contrary - it means that if you have a debt-reputation problem but feel safe in your ability to repay, then you&amp;#x27;ll want to issue your bonds in US to &amp;#x27;put your money where your mouth is&amp;#x27; and get a better price.  Or, in cases like Argentina, the potential investors will say &amp;#x27;either US jurisdiction or no deal&amp;#x27;.</text></comment>