Tuesday, May 21, 2024

ECONOMY | 29-02-2024 00:15

Argentina’s US$18-billion Chinese FX line eyed for US YPF judgement

Burford Capital, trying to collect on a US$16-billion US court judgement against Argentina, is exploring whether a currency swap line with China could be used to satisfy the debt.

Burford Capital, which is trying to collect on a US$16-billion US court judgement against Argentina, is exploring whether a currency swap line provided to the country by China could be used to satisfy the debt.

The US$18-billion line, similar to ones China has used elsewhere to expand its influence, was included in an information request Burford filed Tuesday night in federal court in New York. The litigation funder also sought information on various overseas assets held by Argentina, in the hopes of possibly attaching them.

Burford purchased claims by shareholders in Argentine oil company YPF SA over its 2012 nationalisation. In September, US District Judge Loretta Preska ordered Argentina to pay a US$16-billion judgement. Burford stands to reap US$6.2 billion if the full amount is paid.

Argentina is challenging the award, but Preska last month authorised Burford to begin collection after the nation failed to pledge assets while it pursued an appeal.

Along with the currency swap line, which has been in place in Argentina for about a decade, Burford also sought information about YPF shares and dividends paid by the company, overseas commercial transactions and bank accounts, and reserves of gold and precious metals held abroad. The fund filed at least 30 requests for so-called discovery of the assets.

According to Burford’s lawyers, Argentina has already said it doesn’t have to respond to the requests concerning assets held by the Central Bank of Argentina — including the China arrangement and the precious metal reserves — because they are immune from attachment. 

Burford argues that assets held by the Central Bank can be attached if the government has a legal or beneficial interest in them, such as if they were used to secure a loan. 

The firm faces an uphill climb to collect on the judgement. Under US law, most foreign government assets are off-limits for seizure. Elliott Management’s Paul Singer spent 15 years trying to collect on a separate judgement on behalf of bondholders harmed by Argentina’s turn-of-the-century default. The case was ultimately resolved with a historic US$4.65-billion settlement in 2016.

Argentina could similarly try to drag out the YPF case with appeals, but having the judgement hanging over it could also hinder the beleaguered country’s efforts to access international capital.

by Jonathan Gilbert & Bob Van Voris, Bloomberg


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