December 17, 2008

by Senior Advisor, John Dietz

Pension Funds Frozen

Judge Thomas Griesa, of the Second Circuit in New York ruled that $200 million USD of Argentine pension funds could not leave the country.  Judge Griesa stated that the funds must be held in the US, pending lawsuits, at the request of bondholders who are already the victims of the South American 2001 default.

This occurred with a spark of an Ecuador default last week, heightening the fear that Argentina will follow it’s South American neighbor.
The Argentine President, Cristina Fernández Kirchner, signed into law a government takeover of the private pension funds earlier this month into a fund called Anses. In 2001, Argentina collapsed in a $95 billion default, the world’s biggest, and fears have mounted that its $21 billion liability servicing obligations for 2009 will prompt a second default.  The shift of the pension funds by the President was seen by the US judge as an attempt to avoid debt obligation.
The judge said the assets are subject to US creditors seeking to recover billions of dollars because their administrator is a government entity.  The request to freeze assets was filed by companies who held out and rejected the Argentine debt restructuring in 2005.  
US Creditors rejected an Argentine debt restructuring in 2005.  The creditors who have already obtained judgment, filed to freeze any money movement from New York until their creditor obligations have been fulfilled. Argentina accepts the are owe $29 billion USD with interest.
Argentina blames the problem on the global financial crisis.  US creditors don’t care why, they just don’t want to let the money out of their reach.