The $16 Billion YPF Inheritance

Latest movements in the $16 billion owed to Burford (and Grupo Petersen).

Welcome Avatar! Throughout history, Argentina is on the exact opposite end of the Lannister family in Game of Thrones: it rarely pays its debts. After the due date passed for the $16 billion owed to Burford and associates in the YPF nationalization case, this was confirmed once again.

Granted, it was impossible for Argentina to come up with this sum or anything close to it, given the fact that international BCRA reserves were still well in the red (about -$11 billion in January).

Slowly the reserves are moving back to greener pastures, with Minister Caputo leading the way of 100-300+ million buys every day. At this pace, the BCRA could have positive net reserves at the end of March.

However, that is still far removed from the $16 billion needed to pay for the expropriation of YPF led by Axel Kicillof in 2012 under Cristina Kirchner’s government.

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Autist note: read more on the absolutely insane corruption story around YPF (and how politicians involved in the expropriation are also filling their pockets with the Burford case against the Argentine state):

YPF: the laundromat of the century

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In Davos DDOS & Short-Term Argentina Outlook, I anticipated that embargo requests could be on the horizon:

On January 10, the $16 billion US token from the Burford YPF nationalization case, was due. Of course, this money was nowhere to be found and Argentina has not paid a dime yet, so embargo requests could begin.

The Government had asked to extend the January 10 deadline to present guarantees, but Judge Preska denied it.

Milei came up with a “Kicillof Tax” (after the Minister of Economy responsible for the nationalization) in order to pay for it, but so far this has not materialized.

Following the ruling, Burford can now claim asset seizure, a process that could take its time but that Argentina is certainly familiar with — see a previous case of a navy ship that was embargoed by hedge funds.

Any seizure of State assets that may occur from today will not be placed as collateral but will be the property of the beneficiaries of the ruling who will take them as a form of payment for the $16.1 billion.

Two months have passed since the deadline, and it looks like the first steps towards embargoes just came in.

Fragata Libertad 2.0?

As you might recall, when Paul Singer’s Elliott Management tried to collect the debt in the Argentine bond holdout case, the methods used attracted international attention when navy ship Fragata Libertad was seized off the coast of Ghana.

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Paul Singing "Bonds Don't Cost a Thing"

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Can we expect similar seizures in the YPF case? It looks like we can.

In February, Burford asked Judge Preska for a hearing to begin the embargoes of Argentine assets around the globe, just like what happened at the time with Elliott Management trial:

Burford requested to include YPF shares expropriated from Repsol together with other shares of the oil company in the hands of the State.

The judge must determine which of the assets can be seized to pay the debt that Argentina seeks to appeal.

Other embargo requests are for accounts, assets, debts and transactions valued at USD 1 million or more; even concessions for the exploration of natural resources were included by Burford.

Burford also included claims on Argentina’s currency swap line with China:

Burford Capital […] is exploring whether a currency swap line provided to the country by China could be used to satisfy the debt. The US$18-billion line, similar to ones China has used elsewhere to expand its influence, was included in an information request Burford filed Tuesday night in federal court in New York.

The litigation funder also sought information on various overseas assets held by Argentina, in the hopes of possibly attaching them.

Unfortunately for Burford, that swap line is probably long gone. When the Milei government tried to reinforce it, Xi gave the thumbs-down. No Hay Yuan.

Argentina gave Burford the finger and responded that Burford does not have the right to request information about diplomatic assets and sovereign issues linked to the BCRA.

Senior Judge Loretta Preska of the United States District Court for the Southern District of New York, who is handling the YPF / Burford case

Getting Blood from a Stone

This month, Judge Preska had summoned the parties to a telephone meeting on March 18. She hopes to clear up some doubts about what is going to happen with the embargoes.

Even though Argentina appealed the $16 billion USD ruling, the country did not present guarantees for that amount, nor does it have them. Meanwhile, Burford has started trying to get the $16 billies worth of blood from the Argentine stone.

It will not be an easy task, but the first request was presented last week in London. This is the step prior to the request for seizure of Argentine State assets.

Although there are no further details yet about the case presented before the Commercial Court of London under the number CL-2024-000129, what is known is that it’s a request for recognition of Preska's ruling in the YPF case.

The objective is to initiate seizures in England, but to do so it must first be confirmed that these seizable assets exist. The English justice system has to approve the procedure.

Certain assets related to diplomacy, such as embassies, for example, cannot be confiscated. Argentina is expected to respond to the request through State lawyers led by the Treasury Attorney, Rodolfo Barra.

“One of the ideas we are working on, is to create the Kicillof tax. That is, pay this fund with a perpetual bond called the Kicillof tax." — Milei plans on calling the future tax burden created by Axel Kicillof by its name.

Final Thoughts

The $16 billion story is just beginning. Within a week from now Burford and Argentina will have the conference call, and Judge Preska will try to mitigate between both parties.

Meanwhile, this case has important implications. The first is the appeal that Argentina presented in the US and that will be resolved within a year. The other, with an impact that could be direct, has to do with the requests before the court of England that could very quickly lead to requests for embargoes.

Collecting from Argentina can be quite the challenge in cases like these, but when it does happen, returns are huge as we’ve seen in the Elliot Management holdout story.

There is no doubt that the YPF case will end up with great returns for all involved, including the political buddies who initially financed Grupo Petersen with public funds.

See you in the Jungle, anon!