Holdout Creditor Says Its Ready to Negotiate With Argentina

Holdout Creditor Says Its Ready to Negotiate With Argentina

ABI Bankruptcy Brief | June 19, 2014
 
  

June 19, 2014

 
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HOLDOUT CREDITOR SAYS IT'S READY TO NEGOTIATE WITH ARGENTINA

Elliott Management Corp., a leader of a group of holdout creditors looking to collect more than $1.5 billion from Argentina, is ready to negotiate and would accept bonds as part of a settlement, the Wall Street Journal reported today. U.S. courts have said that Argentina must pay Elliott's NML Capital Ltd. and other hedge funds seeking compensation for bonds defaulted on in 2001 if it is also making payments on restructured debt it issued in 2005 and 2010. The country's next payment on the restructured bonds is due at the end of June, meaning that Argentina risks falling into default if it fails to reach an agreement with the holdouts. Argentina has sent mixed signals about whether it will negotiate with the holdouts. On Wednesday, a lawyer representing the country said at a U.S. federal court hearing that a delegation would come to New York for talks with the hedge funds next week. However, on Thursday President Cristina Kirchner's chief of staff, Jorge Capitanich, said that "there is no mission or committee ready for an eventual trip to the U.S." Read more. (Subscription required.)

For more on the Argentinian debt crisis, the Supreme Court's ruling and what happens next, make sure to attend tomorrow's Cross-Border Symposium in New York. The program will feature a keynote by James Millstein, who will discuss Argentina's debt situation. Millstein, chairman and CEO of Millstein & Co., represented the Republic of Argentina in connection with the exchange offer for its international bond indebtedness. Register here.

STUDENT DEBT TAKES A BITE OUT OF MORE PAYCHECKS

The federal government is stepping up wage garnishments of student-loan borrowers who have defaulted, another lingering effect of the nation's ballooning college debt, the Wall Street Journal reported on Saturday. Just over 174,800 people who have defaulted on federal student loans saw the Education Department take some money out of at least one paycheck in the fiscal year ended Sept. 30, 2013, according to data requested by the Wall Street Journal. That figure was up 45 percent from 10 years earlier and excludes individuals working for the federal government. The Education Department can automatically begin taking as much as 15 percent of borrowers' after-tax wages, and unlike private lenders, the government doesn't need court approval. Most borrowers who wind up in garnishment stay there for a while. About 72 percent of such borrowers in FY2011 were still getting money taken out the following year, according to the Education Department. Many remain in garnishment for at least five to 10 years, said Mark Kantrowitz, senior vice president at Edvisors.com, a Las Vegas-based financial-aid website that tracks student-loan debt. Pressure has been mounting on the Education Department to rein in its lending as losses have grown in recent years. There was a total of $1.1 trillion in outstanding federal student loan debt by the end of March, up 9.2 percent from the previous year and 53 percent from 2007, according to Edvisors.com. Unlike with private student loans, which totaled $170 billion in outstanding debt in March, nearly all borrowers can get approved for federal loans. Read more. (Subscription required.)

U.S. BANKS SEEN AS FALLING SHORT OF NEW DEBT FUNDING RULE

Wells Fargo, State Street and JPMorgan Chase & Co. are below or almost at the minimum capital thresholds expected to be included in a rule still being hammered out by U.S. regulators that's meant to mitigate taxpayer losses in another financial crisis, according to a Reuters analysis yesterday. U.S. banks are already required to hold equity equal to about 10 percent of their balance sheets to serve as a shock absorber to cover the risk of a sharp drop in the value of loans, investments and other assets on their books. Banks expect U.S. regulators to require them to hold another 10 percent in bonds with maturities of more than a year, as well as other instruments, as part of the forthcoming rule. Wells Fargo's loss-absorbing capital stood at 17 percent at the end of last year, State Street's was 18.2 percent and JPMorgan's stood at 19.1 percent, according to a Reuters analysis of eight banks, based on regulatory filings and methodology recently presented by Citigroup. Analysts and officials at banks are basing their estimates for the benchmarks partially on discussions with regulators and on wider market assumptions for what would be a reasonable level. The Federal Reserve has typically taken a tougher stance than its counterparts in the European Union. Read more.

ANALYSIS: HOW GENERAL MOTORS SILENCED A WHISTLE-BLOWER

Courtland Kelley had sued GM in 2003, alleging that the company had dragged its feet addressing dangers in its cars and trucks, including a flawed ignition switch in the Chevrolet Cobalt that could easily slip into the "off" position -- cutting power, stalling the engine, and disabling airbags just when they're needed most, Bloomberg News reported yesterday. Even though Kelley lost his suit, he thought that he'd done the right thing by blowing the whistle and paved the way for other GMers to speak up. Now he saw that he'd accomplished the opposite impact: His loss, and the way his career had stalled afterward, taught others at the company to stay quiet. Kelley had been the head of a nationwide GM inspection program and then the quality manager for the Cobalt's predecessor, the Cavalier. He found flaws and reported them, over and over, and repeatedly found his colleagues' and supervisors' responses wanting. He thought they were more concerned with maintaining their bureaucracies and avoiding expensive recalls than with stopping the sale of dangerous cars. Eventually, Kelley threatened to take his concerns to the National Highway Traffic Safety Administration. Frustrated with the limited scope of a recall of sport-utility vehicles in 2002, he sued GM under a Michigan whistle-blower law. GM denied wrongdoing, and the case was dismissed on procedural grounds. Kelley's career went into hibernation; he was sent to work in another part of the company, and GM kept producing its cars. The defective part has been linked to at least 13 deaths and 54 crashes, and investigations into GM continue. Read more.

NEW CASE SUMMARY ON VOLO: CHERRY V. NEUSCHAFER (IN RE NEUSCHAFER; 10TH CIR.)

Summarized by Lars Fuller of BakerHostetler

The Tenth Circuit BAP affirmed the bankruptcy court's judgment applying issue preclusion to except from discharge state court fraud in the inducement judgment. The BAP also affirmed the bankruptcy court's judgment not to except from discharge the state court's judgment on RICO, or attorney fees and costs.

There are more than 1,300 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.

NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: FURTHER EXAMINATION OF ARGENTINA'S DEBT OPTIONS

A recent blog post takes a closer look at Argentina's options in the wake of the Supreme Court's denial of a lower court appeal that said that the country can't make bond payments until it compensates holdout creditors that had refused to accept restructured debt in the years following Argentina's 2001 default.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

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