Argentina debt ruling upends restructuring norms

lunes 23 de junio de 2014 12:52 GYT

(This article first appeared in the June 21st edition of IFR, a Thomson Reuters publication)

* Uncertainties heightened over future sovereign workouts

* IMF backs new plan to reprofile debt

* Issuers could follow industry lobby guidelines

LONDON, June 23 (IFR) - Holdout creditors' legal victory over Argentina looks set in the short term to complicate future sovereign debt restructurings but it may also prompt quicker implementation of long-proposed reforms to ease such stand-offs.

The US Supreme Court last week declined to hear Argentina's last-ditch effort to overturn a ruling that - as a result of the bonds' pari passu or equal ranking clause - the country must pay litigant holdouts in full when it next pays those who accepted 2005 and 2010 exchanges.

At the same time, the IMF had just completed a meeting outlining proposals to overhaul how it deals with sovereign debt problems, giving preliminary backing to a plan that in exceptional circumstances it might try to extend bond maturities of distressed sovereigns seeking its help.

"Given that the pari passu interpretation stands, creditors will have one more significant weapon in their arsenal against sovereigns who default. That is big, given creditors generally have very few weapons," said Mitu Gulati, a law professor at Duke University.

One sovereign restructuring adviser agreed that the ruling will change the mindset of bondholders dealing with a sovereign default.   Continuación...