Pablo Giancaterino, an Argentina based attorney working with Miami, Florida lawyer Michael Diaz Jr. of Diaz Reus Targ in Miami, recently took a hard look at the latest proposal from the minister of economy in Argentina, Martin Guzman. One of the experts at the law firm in regards to anything going on in Argentina, he believes that this newest proposal is an invitation for litigation in the end.
The proposal breaks down to a three-year grace period with no payments for the bondholders. This would lead to a reduced deduction on the capital and over a 60% cut in interest, which totals just over US $41 billion. The Government in Argentina believes that this is the best opportunity for Argentina at a time, but not everyone is on board. For example, the Committee of Creditors of the Argentine Debt (ACC) quickly responded that the proposal would not work. The Group of Holders of Exchangeable Bonds also thought the proposal was not a solution that would help.
Giancaterino believes that this proposal opens up a big chance of litigation that will only harm the country in the long run. Not everyone will follow this route, but he believes that many will participate in class action lawsuits once details are ironed out.
In an interview with infobae.com, Giancaterino breaks things down by looking at two different types of investors. The first type of investors will be able to simply accept any proposal and balance things out without much of an issue. However, other investors will find it very difficult to accept these terms, because they are still putting themselves at a huge risk. Not being able to handle the current proposal could lead to severe financial consequences that would be difficult to bounce back from.
When enough people feel like they are not getting a fair shake with the proposal, that is when legal issues start to pile up. Giancaterino mostly focuses on civil and criminal tax law litigation during normal times, but he also has dabbled in arbitration and dispute resolution. With COVID-19 wreaking havoc around the world, new, unique cases are coming up all the time for experts to examine.
No one knows for sure if the Argentine government will adjust things from their first proposal. The government understands that reaching an agreement with as many private bondholders as possible will help aid the payment of Argentina public debt. However, if things do start to play out like similar debt situations such as in 2001, there could be some serious class action lawsuits piling up. Giancaterino believes it is in Argentina’s best interest to continue working on the proposal to make things a little more favorable for all.