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Gtx1...from a Seb's report distributed to his clients regarding the new YPF bond.
US LITIGATION RISK
YPF proposed new international bond issue should not be affected by ongoing litigation in the US…for now. On March 31, 2023, New York Judge Loretta Preska relieved YPF of any wrongdoing in the expropriation case initiated by the Petersen companies and Eton Park Capital in 2015. As a result, it appears that the 2031s collateral will remain secure against attempts by the beneficiaries of the $16.1 billion court-ordered award to enforce the judgment and attach any royalties accumulated in the Export Collection Account. However, we opine that this assurance is applicable for the next nine-to-twelve months. Beyond this timeframe, the situation hinges on the Second Circuit Court of Appeals' decision regarding the plaintiffs’ pursuit to reintroduce YPF to the case.
Following Argentina's appeal filed in November to contest the March 31 ruling, the beneficiaries of the YPF judgment lodged their own appeal challenging the oil and gas company's exoneration. The outcome, dependent on the three-judge panel's decision, could potentially involve YPF being reintegrated into the case. Consequently, its assets, particularly those situated abroad—such as the Export Collection Account—could be susceptible to attachment if the Republic fails to reach an agreement with claimants before this juncture.
We are not discouraging the acquisition of the 2031s. However, we are outlining a sequence of events that could potentially create a challenging situation for YPF by year-end. YPF, who incentivized investors to acquire its new bonds by offering guarantees, may face the possibility of these guarantees being susceptible to attachment by beneficiaries of the YPF Expropriation Case judgment.
According to US Courts, the Second Circuit has an overturn rate of 9.2%, indicating that the likelihood of a successful appeal by plaintiffs is low. Nevertheless, the YPF Expropriation Case has offered multiple twists and turns throughout its almost nine-year history and, as long as the appeal remains pending, there’s a probability of the company being brought back into the case and its assets subject to attachment efforts.
When and if any attachment effort occurs, YPF will fight any attempts to seize its assets (including the ECA) in the courts.
What makes you think they are not already talking? Do you believe they will publicly announce it?
Burford will get paid, but it will take quite a long time.
Let me break some news for you: Burford's shareholders are not a priority for President Milei. He was elected because he had an agenda, not because he was going to settle with beneficiaries of the YPF judgment first thing out of the gate. I do believe the YPF case should be a priority, but it is not.
Mr. Milei wants to get rid of this issue asap. But he can't. He cannot pledge assets (Congress will not approve it) and he cannot commit to any payment because Argentina doesn't have the means.
Again, this will take time.
You want to enforce the judgment? Go ahead. It is quite a difficult thing to do. The easiest part is finding assets. If they are located in the US, better. However, Argentina currently has a $450 million attachment order from Judge Preska that Argentina has appealed. Argentina will appeal any attachment order in the US. Yes, a parallel appeal to the YPF ongoing appeal.
If the assets are overseas, you will need a local court to recognize a foreign judgment. Again, time consuming.
If you a BUR shareholder, enjoy the ride. It's going to be a wild one.
This is not President Milei. He has already said that "Argentina has the willingness to pay". He is in your side. This is Sullivan and Cromwell speaking. They haven't scored a single victory in this case since being appointed and all they can do is recommend the new government to kick the can down the road while more urgent matters are addressed for the argentine pop. They get paid for litigating, not for reaching a settlement.
Gtx1, YPF is NYSE and BCBA listed company whose majority owner is the Republic (26%) and its oil-producing provinces (25%). Its revenues are not Argentina's and it can do whatever it pleases with its dollars. Argentina only receives YPF's dividends when and if the company distributes them (usually in July and December). These USD can be claimed by Burford. Nothing more yet. YPF is no longer in the case (pending Burford's appeal) and even if it was, the government was always going to pay for the judgment. If the Second Circuit rules in Burford's favor, then all USD generated by YPF and its assets, will be in play.
Cheers.
Not so fast. Don't blame Burford's Asset Recovery team if they show up empty handed or without any applaudable asset to seize on JAN 11. There are multiple beneficiaries of court ordered awards that have not been able to find any valuable assets owned by Argentina. This does not mean that they haven't, but I would understand if they can't show any real progress in that front.
Pennylots, Argentina, as a country owns 51% of YPF Class D shares. Class D shares represent 99.5% of all shares issued by the company. The 51% is distributed 26% to the Federal Government and 25% to the oil-producing provinces. Although the transfer never took place, they are officially earmarked for these territories.
Don't worry about those protests. These groups of activists will reject whatever Milei will do during his presidency. By Law, they receive Federal funds in exchange of absolutely nothing. Now he wants them to go to work or those funds will be cut.
Https://x.com/sebastianmaril/status/1737312134394974512?s=46&t=9Dxy1DO9cFqZHr5TpFjq1A
The piece doesn’t tell the whole story. For instance, what are the disadvantages of not settling? Any reputational advantages for Argentina if it settles? How much money would Argentina be saving if it settles? What is Argentina’s track record with the appellate court? What is Argentina's track record with the SCOTUS?
Milei just named Rodolfo Barra as the country's new Chief Legal Strategist. He will be in charge of the legal aspects of a possible agreement with Burford or continue with the ongoing appeal.
According to Seb in a different chat group, Mr. Barra recently said this:
"According to the former Minister of Justice, the expropriation of YPF may pose some future complications for a potential privatization, but it can be privatized again, even through an Emergency Decree (DNU). 'When there is a necessity and urgency, it can be done by DNU, as we did with the airports in 1998. Since the 1978 World Cup, no significant works had been carried out at the airports. An Emergency Decree was issued, and they were privatized. Today, there is a terrible financial and economic emergency,' pointed out the lawyer.
Finally, Barra clarified that the lawsuit Argentina faces due to the expropriation of Repsol in 2012 does not represent any impediment to moving forward with privatization."
My two cents on what's next. Milei needs to "break everything" and start over. Argentina has been run under the same ideology for 40 years and results show. Don't be discouraged by tough times ahead. Argentina needs to put its house in order to make room for economic recovery.
An this is key...don't knock on Milei's door demanding payment just because he plays for your team. Think what Argentina needs most and there lays your answer to resolve the YPF matter through negotiations. I am not allowed to say more.
Cheers.
From Seb to all of us:
"Beneficiaries of foreign judgments against the Republic, allow me to say a few words. Be patient.
I firmly believe that Argentina's new leadership is fully aware that it must demonstrate a commitment to upholding the rule of law and shift away from an ideology that has detrimentally impacted the nation's reputation.
President-elect Javier Milei knows that Argentina's path to recovery hinges on the government’s acknowledgment that the country's persistent legal challenges have rarely been resolved successfully in court and must be effectively addressed through negotiations.
Again, be patient. Change is underway."
Seb's report to clients was used by Burford in last week's presentation to Judge Preska.
"These payments could be securitized. According to Latam Advisors, such a securitization would generate roughly $2 billion today. (27)"
(27) “YPF Expropriation Case: The Payment,” Latam Advisors, September 2023, at 4
The appeal is now underway.
https://twitter.com/SebastianMaril/status/1717185302769422492