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Thu Mar 31, 2016, 04:33 PM

Argentine Congress passes holdout payment bill; U.S. Appeals Court still an obstacle.

The Macri administration celebrated its first major Congressional victory last night as the Argentine Senate approved its holdout payment bill with significant support from the Victory Front (FpV). The bill passed by 54 votes to 16, with 26 of the aye votes coming from the center-left FpV.

The Lower House of Congress green lighted an amended bill two weeks ago by a margin of 165 votes to 86. Passage in the Senate thus leaves the legislation ready for President Mauricio Macri signature. The bill, Macri argued, is necessary to bring an end to years of legal disputes with holdout creditors over debt that was defaulted in 2001.

The bill repeals articles of the 2005 Padlock Law (which precluded any agreements with bondholders who refused debt swaps at the time) and the 2014 Sovereign Payment Law (which allowed bondholders - most of whose payments had been blocked by a Manhattan lower court - to collect in Buenos Aires) and authorizes the government to issue $12.5 billion in bonds in order to pay holdouts $6.5 billion.

On Tuesday the chair of the Victory Front (FpV) caucus in the Senate, Miguel Pichetto, threw his support behind the bill despite the FpV’s almost total rejection of the initiative in the Lower House. Other FpV senators were more critical of the vote. Senator Marcelo Fuentes said that former President Néstor Kirchner (who presided over the successful 2005 bond swap that was eventually accepted by 92% of bondholders) “would never have negotiated in these hurried conditions.” Senator Anabel Fernández Sagasti accused those voting in favor of the bill of suffering from Stockholm Syndrome. “They are leading us straight to hell,” she said. “The government is trying to sell us a crisis so that we may incur expensive debt with bad terms.”

The $6.5 billion deal established with holdouts at the end of February is centered around a $4.65 billion payout to four vulture funds - including $3 billion for the main litigant, Paul Singer's Cayman Islands-based NML, which bought old defaulted Argentine bonds in 2008 for $48 million.

The deadline for Argentina to issue payouts is April 14; but because on March 11 the U.S. Court of Appeals in New York reimposed the 2014 injunction against paying the country's regular bondholders (the 92%) until after holdout demands for much higher repayment terms were met, and because the bill passed by Congress is contingent on the lifting of this injunction, the agreement may still fall through.

The possibility that Argentina will not pay by the deadline is not remote, given that one house of the Argentine Congress has passed a bill conditioning payments on this Court lifting all injunctions and that oral argument will take place on April 13,” Paul Singer's NML acknowledged. “Whether or not this court ultimately affirms and if Argentina’s Congress requires the court to confirm lifting all injunctions as a precondition to payment, the likelihood of Argentina making payment by April 14 would appear to be remote,” it added.

At: http://buenosairesherald.com/article/211716/senate-gives-macri-big-win-on-holdouts-

And: http://www.buenosairesherald.com/article/211451/%E2%80%98vultures%E2%80%99-ask-gov%E2%80%99t-to-comply-with-pay-date

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