It was only enough for the judge Loretta Preska of the Southern District of New Yorkin whose court the lawsuit against the Argentine State for the improper expropriation of YPF in 2012 fell, to make final his sentence from just a week ago. Now the Argentine State must pay the US$16,099 million stipulated and we only have to wait for the Treasury Attorney General to decide how it will make its wish to appeal effective. But the times, which were believed to play in favor of political will in an electoral year, today accelerated. The average appeal, it is known, can be expensive (you have to leave a deposit, probably in bonds to do it) and only one in five cases are reviewed in state court. The idea of ultimately going to the Supreme Court clashes with the history of similar casess: the high court only takes some cases to resolve and in the previous case of the holdouts. It is a reality that Alberto Fernández will be able to leave the Casa Rosada in less than three months without having to sign any agreement due to this conflict.
Two months ago, after a presentation by the parties during three long sessions of the trial, they had already put specific figures to limit the amount of compensation for which the Argentine State should compensate those harmed by the irregular expropriation. The judge who succeeded the old acquaintance Thomas Griesa in 2017 had validated what was agreed upon by the parties and went to an intermediate room after which she would give a final ruling. This, of course, if the parties do not agree beforehand and set an amount between both “ends” to definitively settle the issue.n.
That didn’t happen and with full throttle, the magic number finally appeared last Friday: US$16,099 millionalmost the ceiling, an amount that many analysts consider excessive but the Argentine financial record did not help much to make it lower.
Sebastian MarilCEO of Latam Advisors, who followed the long judicial process very closely, explains that in the United States judges generally do not write the ruling, they just sign it. “Last Friday, Preska, when publishing the variables to calculate the final amount, ordered both of them to write the amount together interpreting what she stipulated in the ruling, but the interpretation of Argentina and that of the plaintiffs were different, there was about US$1,100 million difference“, Explain. The judge decided not to wait any longer, she thought that the plaintiffs’ interpretation is correct and published what is called a final judgment which is a final sentence, which in the United States is a final sentence unlike what happens in Argentina.
The judge had not previously set an amount, but rather determined the variables that should be considered in the matter, especially the delay that ran at a rate of 8% per year and that ended up being a punishment for the decision to kick the issue without considering it. As of the final ruling, however, the delay in paying has been set at a variable rate that in September is 5.4% annually, almost a household attention.
The Government quickly expressed indignation at the amount and said it would appeal the sentence. But that cannot be done until both parties meet to draft the agreement and the intervening judge closes this judicial instance. This timing would coincide with the general elections in October, but would accrue interest of 9% annually starting today. In any case, the appeal would not be for this figure applied but for the ruling of March 31 in which the responsibility was placed on the Argentine State.
The YPF case. In 2012, when the Government (then headed by Cristina Fernandez) the company that until now managed the Eskenazi group with majority participation of Repsol intervened first and proceeded with a partial expropriation through a law, despite there being a statute of the company after which there were investors, they would not proceed to carry out a public offering of shares (OPA). The story is known: Repsol complained, but two years later ended up arranging a US$5 billion package which included the rest of the shares that had not been expropriated (51% in total). The Eskenazi group could not follow the train and the bankruptcy of the companies involved were absorbed by investment funds that then “sold” the claim they made for poor execution of the expropriation. Judge Preska had already determined the responsibility of the State for the irregular intervention and that is why she set a floor and a ceiling – between US $ 4,999 million and US$16.1 billion – to evaluate the damage, based on two factors: the fall in YPF’s share price since the announcement of the intervention (4/16) and the day the expropriation law became final (5/7 ) with a collapse was 40%), on the one hand, and the punitive interest rate for not having previously agreed, on the other. In judicial practice in the United States it is up to 8% annually. Maril remembers that the previous ruling of March 30 had exonerated YPF of responsibility in the matter and placed it on the National State. “The agreed formula is already in the YPF statute on which the amount will be calculated based on the arguments that each party presented,” he comments. Understanding the scope of an adverse ruling in the middle of an election year and the visible face of the operation (Kicillof) being a relevant candidate, it is likely that the Government will try to extend the deadlines and appeal. Of course, in the North American system, only 25% of rulings are reversed in the second instance and, even further, the Supreme Court only chooses a few cases to deal with and it is likely that it could even directly dismiss them..
Maril explains that the alternative path for the Kirchner administration in 2012 would have been to call a takeover bid in 40 business days and set a price at which all shareholders could sell. But it was not done and due to the drop in the company’s value of US$3.5 billion, the original demand was made.
Burford Capital. Faced with these improvisations, short-termism and chicanery of trick players rather than public financiers, increasingly sophisticated players sit at the negotiating table. In this case, who seems to have taken a liking to the portfolio of lawsuits in which he is a part is Burford Capital, a fund for managing assets at risk or ongoing contingencies. Founded in 2009 by Canadian Christopher Bogart (former legal vice president of Time Warner), it is a company listed on the London and New York stock exchanges and at the close of trading today it had a market capitalization of US$2.65 billion, with a spectacular rise of almost 15% “thanks” to the size of the favorable ruling. It defines itself as a financial and asset management company focused on legal aspects, such as the financial side of litigation, risk management, asset recovery and other corporate finance activities. It has offices in New York, London, Chicago, Washington, Singapore, Dubai, Sydney and Hong Kong. ANDIt employs 155 professionals and has a portfolio of more than 1,000 trials with a projected value of US$4.6 billion by the end of 2022.
For this litigation machinery (generally successful: its stock rose 70% in the last 12 months), the ingredients are basically three: expertise to know the viability of a claim, financial and professional capacity to carry out litigation for a long time, and find the traces that short-termism, improvisation or malpractice leaves behind epics in economic policy. A very unequal battle: the expropriating epic that would be free vs. the legal expert in regulated markets who now even has the possibility of blocking the condemned country in the capital markets until it pays.
As the story repeats in its catchphrase Walter Nelson: “match liquidated”. What follows will be a negotiating table to see how and when in ways that do not make explicit the legal defeat of an already debatable idea.
