The market delivered an even stronger ruling than what was decided by Judge Loretta Preska of the Southern District of New York, in whose court the lawsuit against the Argentine State for the improper expropriation of YPF in 2012 fell. Six weeks ago, after an exposure Of the parties during three long sessions of the trial had already provided specific figures to limit the amount of compensation for which the Argentine State should compensate those harmed by the irregular expropriation. The magistrate who succeeded the old acquaintance Thomas Griesa in 2017, had validated what was agreed by the parties and went to an intermediate room after which she would give a final sentence. This, of course, if the parties, before they do not agree and set an amount between both “points” to definitively settle the issue.
That did not happen and with the accelerator at full throttle, the magic number finally appeared this afternoon: US$16,096 million, almost the ceiling, an amount that many analysts consider excessive but the Argentine financial record did not help much to make it lower.
The judge did not “set” the amount directly, 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. .
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 Fernández) first intervened in the company that until now was managed by the Eskenazi group with majority participation from Repsol and proceeded to a partial expropriation through a law, despite the existence of 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: Resol complained, but two years later ended up arranging a US$5 billion package that 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$16,100 million – to evaluate the damage, based on two factors: the fall in the price of YPF’s action since the announcement of the intervention (4/16) and the day the expropriation law was finalized (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. Sebastián Maril, CEO of Latam Advisors, who closely followed the long judicial process, 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 dismiss them directly.
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.
Composer referees. Repsol had initially gone to ICSID, which is the arbitration tribunal of the World Bank, the International Center for Settlement of Investment Disputes. The parties involved in agreements that have differences in the application of what was agreed come to him, something common in privatizations and service concession contracts. Almost all the companies whose contracts were the subject of controversy came to him when convertibility imploded and they could not apply the dollarization trigger clauses. As a list stated without repeating and without blowing, Maril also remembers the cases of Aguas Argentinas (restated in 2006 by Néstor Kirchner), with a ruling against US$383 million and Aerolíneas Argentinas (again for irregularities in the 2008 expropriation ) with an adverse award of US$340 million. And as icing on the cake, this year’s rulings by courts in London and New York for the poor design and worse application of the “PBI coupon” that included, once again, the ineffable formula of the “patriotic drawing” to pay less and not follow the formula originally stated. The rebellion, in this case, cost the British headquarters US$1.5 billion and there is still a similar ruling in New York.
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 it is 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$3,484 million, with a spectacular increase 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. It employs 155 professionals and has a portfolio of more than 1,000 lawsuits with a projected value of US$4.6 billion by the end of 2022.
For this litigation machinery (generally successful: its stock rose 86.3% 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. time and find the traces that short-termism, improvisation or malpractice leaves as a result of 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.
