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News : International Last Updated: Nov 28, 2012 - 10:09 AM


Markets: Fitch says default by Argentina is probable; Glanbia’s co-op members to vote on PLC structure
By Finfacts Team
Nov 28, 2012 - 10:06 AM

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Last month, President Cristina Fernandez de Kirchner said Argentina would not bow to "blackmail by vulture funds", amid a row over a seized Argentine navy ship. The ARA Libertad, a training ship, was detained in Ghana in October at the request of creditors who say Argentina still owes them $300m from 2001. Photo: Wikimedia Commons

Fitch Ratings has downgraded Argentina's long-term foreign currency (FC) Issuer Default Rating (IDR) to 'CC' from 'B' and the short-term IDR to 'C' from 'B'.

The downgrade of the long-term foreign currency IDR reflects Fitch's view that a default by Argentina is probable. The increased probability that Argentina will not service its restructured debt securities issued under New York law on a timely basis reflects US District Judge Griesa's decision on Nov. 21 to remove the stay order on the ruling that Argentina must pay US$1.33bn to holdout investors concurrent with or prior to its payments due to holders of the 2005 and 2010 restructured debt. The stay order will be removed with effect from Dec. 15.

Argentina is due to pay approximately USD3 billion of GDP-linked warrants on Dec. 15, 2012. A missed payment on the GDP-linked warrants could trigger a cross default on all exchanged debt securities issued under international law. Subsequently, a missed coupon payment of any other external securities would also trigger a cross default on all exchanged bonds issued under international law.

A hundred years ago if a country was reluctant to pay its debts, gunboats may steam to its shores. Since then sovereign immunity has reigned but the latest development in a legal argument over Argentina's 2001 defaulted debt could shift the balance toward creditors. Reuters reports that investors holding $1bn worth of restructured Argentine debt filed an emergency motion in a US federal appeals court on Monday to fight a ruling that they fear could prevent payment on their bonds and trigger a new default. The move came as Argentina makes a last-ditch attempt this week to stall the US court ruling that has shaken the nation's strategy to put a 2002 debt crisis behind it and fueled fears of a fresh default.

A decade since it triggered the biggest sovereign default in history, Argentina faces a stark choice between depositing $1.3bn before December 15 to pay "holdout" creditors who rejected two debt restructurings, or jeopardizing payments to its other bondholders.

Reuters says that about 93% of bondholders agreed in 2005 and 2010 to swap defaulted debt from the 2002 default for new paper at a steep discount.

However, US District Judge Thomas Griesa last week ordered Argentina to pay the holdouts, led by Elliott Management Corp's NML Capital Ltd and Aurelius Capital Management, who rejected the swaps and are fighting for full repayment in the courts.

Glanbia’s co-op members are voting today to determine whether the co-op should be permitted to reduce its shareholding below the current 51% level in Glanbia Plc.

Liam Igoe of Goodbody comments: "In order to do so, it will require the approval of 75% or more of the attendees at today’s meeting. The results should be available later this evening and if there is sufficient support, the members must vote again in two weeks and again will be required to give a 75% majority in favour of the change.

The decision on whether or not to reduce the co-op’s stake below 51% will have a direct bearing on both the financial structure of the new JV in terms of its debt/ equity mix (as part of the proceeds will be invested in the JV). It will also have some bearing on the future development of the plc itself in that any requirements to raise new equity to fund expansion would be more problematic."

Justin Doyle, Investec Bank Ireland, said today:

1. The markets took few positives from the Greek debt deal yesterday and FX market players spent most of the day unwinding long euro positions after any follow through on the upside failed to materialise.

2. In actual fact most of yesterday was spent digesting negative newsfeed in the dual shapes of lower OECD growth forecasts and more hawkish Fed comments from Dallas Fed President Richard Fisher.

3. Then to top it off in late NY trading, US fiscal cliff issues came firmly back into focus. Senate Majority Leader Harry Reid stuck a pin in what had been a slowly inflating balloon of hope when he said last night that little progress had been made in fiscal cliff negotiations over the last week or so. US and Asian equity markets all closed lower on the day.

4. As ‘fiscal cliff’ deadlines approach fast, President Obama is due to sit down with some very concerned business leaders today. They will obviously be ensuring that he is made fully aware of the extreme sense of urgency that now prevails and will at the very least be looking for some words of reassurance that he will do everything within his powers to avoid a steep drop.

Economic View: Important read-throughs from Greek deal to Ireland; Dermot O'Leary of Goodbody comments - - "Ever since the euro area sovereign crisis began the principle of equality in any assistance that stressed countries received has been an important one. For example, when euro leaders sanctioned an improvement in loan terms for Greece in 2011, an interest rate reduction soon followed for Ireland and Portugal.

It is little wonder then that questions have been asked as to what the most recent deal for Greece means for Ireland and Portugal. Some of the measures have no relevance for Ireland, such as the reduction on interest rates on the initial Greek Loan Facility (GLF). The bond buyback programme is also not relevant for Ireland given that bonds are trading above par across the curve. However, interest deferral and term extension on EFSF loans is relevant for Ireland and indeed Portugal and sets a template for further assistance for these countries. Funding is currently provided to Ireland at the cost of funding for the EFSF, with terms ranging from 5 years to 30 years. The principle of maturity extension has already been accepted for Ireland (and was already accepted for Greece in 2011 too).

It is up to Irish politicians to argue its case for equal treatment for the country at a European level. European policymakers are setting dangerous precedents by granting further assistance to countries whose programmes go off track. Reward should be for good behaviour, not the opposite. At the very least, the decision on Greece on Monday night should help on discussions on restructuring of the promissory notes."

US Markets

In New York Tuesday, the Dow fell 89 points or 0.69% to 12,878.

The S&P 500 slid 0.52% and the Nasdaq slipped 0.30%.

Asia Markets

The MSCI Asia Pacific Index slid 0.6% Wednesday.

Japan's Nikkei 225 closed down 1.22%; China's Shanghai Composite Index fell 0.89%; South Korea's Kospi dipped 0.65%; Australia's S&P/ASX 200 dropped 0.21% and in Mumbai, the Bombay Stock Exchange's Sensex 30 climbed 1.65%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.37% in morning trading Wednesday.

The ISEQ  has fallen 0.27%.

CRH is down 0.58%.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.2921 and at £0.8071.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Tuesday this week the BDI closed up  3 points or 0.27% at 1,097 - -  the BDI is down 36.88% in 2012.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

The skyscrapers and immaculate beaches of Singapore's seaport look out on one of the world’s largest parking lots: mile after mile of empty cargo ships, as far as the eye can see.

Similar fleets bob at anchor, with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And dozens of newly built ships float empty near the giant shipyards of South Korea and China, their owners from all over the world reluctant to accept delivery during one of the worst markets ever for the global shipping industry.

As recently as six weeks ago large freighters that can carry bulk commodities like iron ore or grain were fetching charter rates of $15,000 a day. Now, brokers and owners say, the going rate is $6,000 a day. If any customers can even be found.

Crude oil for January 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $86.92 down 26 cents from Tuesday's close. In London, Brent for January delivery is trading on the International Commodities Exchange at $109.50. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is at $23 - - The Globe and Mail says that for the past 10 months, Canadian producers - - whose prices are tied to WTI - - have been taking steep discounts for their oil compared with international crude prices that are benchmarked against North Sea Brent, which can be shipped more readily. In the past, WTI tended to trade at a small premium to Brent, because it is easier to refine.

That spread hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then. After plans for more pipeline capacity at Cushing, Oklahoma, the differential narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,739.20, down $2.60 from Tuesday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.


© Copyright 2011 by Finfacts.com

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