All items from Credit Slips

PRflag The fast-moving legislation's title does not include the word bankruptcy. Materials distributed by the Puerto Rico government explain, though, that the bill is meant to provide chapter 9-like relief to Puerto Rico public corporations through one of two paths - one more prepack-like than the other. Calling the effort "dazzling," Cate Long notes, "[s]eldom have financial markets seen such an elegantly choreographed approach to haircutting sovereign debt."

Posted 9 weeks 1 day ago

Ordered not to carry out its planned swap into local-law (and local payment) bonds, Argentina has now deposited funds for the June 30 payment with Bank of New York Mellon, trustee under the exchange bonds. Via Joseph Cotterill at FT Alphaville, here is NML's response, which asks Judge Griesa to schedule contempt hearings. (Technically, to order Argentina to show cause why it should not be held in contempt.) The plot thickens.

Posted 9 weeks 3 days ago

As expected, Judge Griesa has reportedly denied Argentina's request for a stay. At his recent news conference, Economy Minister Axel Kicillof did not quite suggest that the government would negotiate only if the stay was granted - instead, he implied that Argentine officials couldn't weigh options without knowing how much time they had. Well, now they know.

Posted 9 weeks 3 days ago

AbstractSenator Harkin's discussion draft of the Higher Education Affordability Act (described here) is expected to include a provision restoring bankruptcy relief from private for-profit student loans. A few years ago, I offered justifications for that move here. Prof. Scott Pryor agrees.

Posted 9 weeks 3 days ago

Yesterday's post noted that, by asking Judge Griesa to re-impose a stay of the injunction, Argentina was effectively asking for permission to pay exchange bondholders on June 30 without making any payment whatsoever to NML and the other plaintiffs. Not surprisingly, plaintiffs oppose the motion. (Here's their response.) The parties held a telephone conference today with the judge, so I would expect a ruling soon.

Posted 9 weeks 5 days ago

Argentina will negotiate with NML. Or maybe it won't. Instead, it will let exchange bondholders swap into local law bonds, in clear defiance of the injunction. Except that this recent order by Judge Griesa forbids the swap and declares Argentina's Economy Minister in violation of the injunction. Well... on second (third?) thought, let the negotiations begin.

Posted 9 weeks 6 days ago

PressConferencePinA little like the ship that Fitzcarraldo (and Werner Herzog) pushed, hoisted, and willed up up up and over a mountain, Detroit's Grand Bargain continues to defy expectations and make forward progress. A significant step today: A big press conference as Governor Snyder signed the necessary bills. Watch here.

Posted 10 weeks 2 days ago

MichiganRoadsThe City of Detroit has proposed a three-hour bus tour of the City to start its chapter 9 plan confirmation hearing. Some creditors object. The City's motion says "[i]f any case ever warranted a Site Visit, this one does." I don't agree, for reasons explored below, but in any event, the eligibility trial would have been a more logical place for it. And even Gilligan and the Skipper too couldn't cover 139 square miles in three hours. So what is going on here?

Posted 10 weeks 3 days ago

A footnote to Mark's recent post on Argentina's remaining options got me thinking about what an Event of Default actually is under the exchange bond indenture. From a reasonably quick look at the (lengthy) documents, I think there might be a non-default route open to Argentina, and possibly also a procedural route to getting the pari passu clause interpretation in front of a New York State court.

The exchange bond indenture para. 3.1 obligates the Republic to pay principal and interest "to the Trustee". The Republic is not obligated to pay the bondholders directly. That's the trustee's duty, if it is paid by the Republic, although the Republic has the option of directly paying the bondholders. Now, there is language in the Prospectus Supplement (page S-67) that:

Notwithstanding the foregoing, Argentina's obligations to make payments of principal and interest on the New Securities shall not have been satisfied until such payments are received by registered holders of the New Securities.

However, when one looks at the Indenture, this language appears only in the form of the debt security itself (exhibit C-2), not in the actual Indenture.

Posted 10 weeks 4 days ago

I just saw Spent: Looking for Change, a documentary about the financial challenges of the unbanked. The film was funded by American Express, but there is no marketing of Amex products in the film. (Amex does offer one of the best non-DDA account options for the unbanked, however.) You can watch the movie for free on YouTube.

The movie really puts a human face on the problems of the unbanked. It doesn't get into solutions (that would take a Peter Jackson trilogy), but it does a great job of setting forth what life is like for the unbanked. Highly recommended.

Posted 10 weeks 4 days ago