Home' Trinidad and Tobago Guardian : August 7th 2014 Contents BG14 | REGIONAL
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2014 • WEEK ONE
T&T s Caricom neighbour,
Grenada, could fall victim to the
ruling by the US Circuit Court
of Appeals in New York that
Argentina cannot pay the
restructured bond holders unless
it also pays hold-out predatory hedge funds in
full, financial experts said last week.
Argentina triggered a situation of default on
July 30, following a long legal battle in New
York which ended with a US judge blocking
Argentina s interest payments to other bond-
holders, unless it also paid predatory hedge
funds who have battled in the US courts to be
paid in full.
Argentina had sufficient funds to pay the
holders of its restructured bonds after its default
in 2001, but it cannot make the payment as US
District Judge Thomas Griesa ruled that the
country cannot pay the restructured bond holders
unless it also pays in full.
Following the adverse order from Griesa,
Argentina claimed that if the country paid the
suitors on their terms, it would lead to claims
from other holdouts of around US$15billion in
The government s coupon payment to restruc-
tured bondholders through a New York bank
had earlier been blocked by Griesa. As a result,
faced a technical default at the end of July as
it did not reach a settlement with the holdout
"Argentina is the first victim from the court s
ruling. It looks like Grenada and the Democratic
Republic of Congo may be the next victims,"
said Eric LeCompte, executive director of Jubilee
USA Network in an article in the International
Business Times on July 30.
The International Monetary Fund earlier noted
that the court s ruling could make it more difficult
for countries to restructure their debts by making
it more attractive for creditors to hold out.
The US government also filed a brief on behalf
of Argentina before the US Circuit Court of
Appeals, arguing that a ruling in favour of the
holdout creditors would harm core US debt pol-
icy. The government noted that the ruling against
Argentina would harm New York s position as
a global financial centre, as countries in future
would seek to sign debt contracts elsewhere to
avoid similar situations.
In June, the US Supreme Court refused to
hear an appeal on the case. The court ruling
could also impact related cases in New York
concerning Grenada and the Democratic Republic
Grenada stopped servicing its foreign debt,
estimated to be about US$193 million, and is
looking to negotiate is looking to resolve a year-
old default on US$193m of bonds. Meanwhile,
African nation, Congo, remains highly indebt-
"The impact of this case is global," added
LeCompte, who serves on expert groups related
to the case at the UN.
The holdout investors, led by New York-
based hedge fund NML Capital Ltd., are seeking
US$1.5 billion for bonds defaulted on by Argentina
in 2001. The country settled with most of its
creditors but the holdout investors refused to
accept the lower payments. The government
has said it cannot now settle with the holdouts
without offering similar terms to the others.
LeCompte told another news agency: "The
Taiwan Export-Import Bank loaned Grenada
US$28 million in the 1990 s for a failed cricket
stadium (which was taken out by a hurricane),"
noted. The bank has a very similar case to NML
Capital and now it has has a precedent in its
corner that strengthens its claims. The New
York judge has the case on hold while Grenada
goes through debt restructuring with almost all
of its other creditors."
But, in an op-ed piece in the New York Times
on August 1, Hung Tran, an executive at the
Institute of International Finance, dismissed
concerns that the Argentina case could have an
impact on the treatment of other debt situa-
He wrote: "A key concern among commen-
tators is that the court ruling could make future
sovereign debt restructuring more difficult by
emboldening investors to hold out or litigate to
get more for themselves.
This concern appears exaggerated given a
recent ruling --- like the Argentina case, in the
federal court for the Southern District of New
York --- denying a request by the Export-Import
Bank of Taiwan (China) to get paid after Grenada
favoured other creditors when it restructured
"The court pointed out that Argentina is a
specific case with a tailor-made decision and
cannot be generalized. To the extent that any
potential future litigation by holders of similar
sovereign bonds would be heard by the Southern
District court, it seems that "copy cat" litigation
based on Argentina s decision is unlikely to be
a big issue."
Following the election of the elections, the
New National Party government led by Keith
Mitchell in February 2013, Grenada developed
a comprehensive home-grown reform pro-
gramme for 2014-17, which involved negotiations
with its creditors for a debt restructuring.
Grenada to be
next victims as
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