Argentina's Debt

Sixteen Years and Counting

  • Why it matters

    Why it matters

    Many German investors who bought Argentine government bonds in the 1990s are still waiting to get their money back.

  • Facts

    Facts

    • Estimates suggest that Argentina has yet to settle claims for bonds with a total value of €500 million to €1 billion ($559 million – $1.1 billion).
    • Argentina’s economy is gaining strength: its stock market index increased by 70 percent over the past year.
    • Argentina filed for bankruptcy in 2001 and has since repaid billions to foreign creditors.
  • Audio

    Audio

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General Views Of The Buenos Aires Stock Exchange
Argentina has been welcomed back onto the global debt markets but still owes money to bond holders. Source: Bloomberg

German lawyer Jakob Heichele is nothing if not determined. He is fighting on behalf of 100 private German investors who are still waiting to be repaid after buying Argentine government bonds in the 1990s. These investors are owed in the region of €100 million, or $112 million.

After Argentina went bankrupt in 2001, it stopped all interest and reimbursement payments. In 2005, the country proposed a hard debt restructure in which investors had to write off two-thirds of their money.

Some investors, like the clients of Mr. Heichele, didn’t agree to this debt restructure. Because the bonds were issued under German law, they successfully sued for full repayment in the German courts. Argentina, however, didn’t feel obliged to adhere to the ruling.

Mr. Heichele has even tried to seize Argentinian government property. A 2009 exhibition, “Dinosaurs – Giants in Argentina” attracted a record numbers of visitors to a museum in the Bavarian town of Rosenheim. It also attracted the attention of Mr. Heichele. He wanted to repossess the reconstructed skeleton of the “Argentinosaurus” – one of the largest known dinosaurs, but his request was blocked by the authorities.

Investors find themselves stuck between international law and capital market law. They feel stood up by Argentina.

Argentina’s attitude toward repayment didn’t change until the conservative Mauricio Macri became Argentina’s president in 2015. His government reached deals with foreign investors who hadn’t agreed to the 2005 proposal. These investors received 150 percent of the original face value of their bonds.

And so in 2015 and 2016, Argentina paid out billions to creditors such as US hedge fund manager Paul Singer, who bought the bonds dirt cheap and took legal steps to force the full payment of the debt. Many German creditors have also now received their money, while Argentina has returned to the global debt markets.

The country’s main stock index, Merval, has increased by more than 70 percent over the past 12 months. In April, the ratings agency Standard & Poor’s upgraded Argentina’s long-term creditworthiness from B- to B. The only problem for Mr. Heichele’s clients and several hundred other investors: they haven’t benefited from any of it.

The 150 percent repayment offer is also valid for their bonds, but the South American country has failed to schedule court dates during which investors could accept that offer. Bonds totaling €500 million to €1 billion have yet to be repaid, according to lawyer estimates.

Those investors find themselves stuck between international law and capital market law. They feel stood up by Argentina.

For Rüdger Böhm (not his real name), one of Mr. Heichele’s clients, the situation has become a tedious routine. Every other week, Mr. Böhm dials the now-familiar number of Argentina’s finance ministry. He doesn’t speak any Spanish and the Argentine clerk can only manage broken English. Nevertheless, they understand each other because Mr. Böhm always asks the same question: “When will I get my money?”

“We always hear the same thing, ‘We need more time’ – we are always getting put off.”

Jakob Heichele, Lawyer for German investors

Mr. Böhm invested 440,000 Deutsche marks, nowadays worth around €220,000, in Argentine government bonds in 1996. He has already taken legal proceedings to ensure that his claims won’t be subject to any statute of limitations. Now he wants to accept Argentina’s repayment offer. But this has proved far from straightforward.

To do so, Mr. Böhm would have to bring his bonds to an Argentine representative, who would sign off on the agreement and transfer 150 percent of the original value – around €330,000. In return, he would have to waive his right to enforce the original court ruling he won, which awarded him €577,000. “In my opinion, it’s no problem to make that happen,” Mr. Heichele said. Argentina simply needs to hire notaries and trustees to execute the transaction.

“But we always hear the same thing, ‘We need more time’ – we are always getting put off,” Mr. Heichele said. “Argentina is not getting it together,” Berlin lawyer Marc Liebscher, who also represents investors, confirmed.

Mr. Böhm considers it to be a strategic move by the Argentinian authorities. The economics department of the Argentinean embassy in Berlin didn’t respond to Handelsblatt’s request for comment.

The only people affected by this are those who have a physical paper copy of their bond. “Everybody else received their money,” Mr. Heichele said. Part of the trouble has to do with the lawsuit against Argentina. To prove that he is a creditor, Mr. Böhm has to present the original paper bond in court.

But because the bonds have a writ of execution on them, Clearstream, the clearing house owned by the German Stock Exchange, is refusing to take them back, which means they aren’t part of Mr. Böhm’s deposit account any more. “If Clearstream does not take the bonds back, then they can’t be traded any longer,” Mr. Heichele said.

Even investor advocates have no idea what to do. “We can’t understand Clearstream’s argumentation,” said Thomas Hechtficher, head of the DSW shareholder association. Clearstream declined to comment.

Investors and lawyers are also counting on support from the German government. “There are possibilities, for example, through the ministry of foreign relations or the ministry of economics,” Mr. Liebscher said.

 

Jakob Blume is a Handelsblatt correspondent based in Frankfurt. To contact the author: blume@handelsblatt.com

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