U.S. fund sues Peru in land bond dispute
U.S. fund sues Peru in land bond dispute
Thu Jun 2, 2016 6:06pm EDT
Gramercy Funds Management LLC sued Peru for $1.6 billion in a dispute over the country's 40-year-old land-reform bonds on Thursday, three days before a presidential election.
U.S.-based Gramercy said in a statement it had filed the arbitration claim because it disagreed with the way Peru calculated the current value of the land bonds when it agreed to honor them in 2013.
By rendering the bonds virtually worthless, Peru violated its free trade agreement with the United States, Gramercy said. The agreement went into effect in 2009.
Gramercy owns about 10,000 of the bonds and said they should be worth $1.6 billion instead of the $1.1 million it said it would get under the current calculations.
Peru's finance ministry called the suit an attempt to discredit Peru. It "mainly appears designed by Gramercy to call attention to their particular interests during the country's current circumstance," the ministry said in a statement.
The bonds were issued as compensation for land confiscated and redistributed to the poor in the 1970s. Gramercy notified Peru of its plans to sue in February and had to wait 90 days before formally filing.
More:
http://www.reuters.com/article/us-peru-gramercy-idUSKCN0YO2V6
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Robert Koenigsberger, Gramercy
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Agrarian Bonds in Peru
(Wikipedia)
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U.S. Securities Law Violation[edit]
In January 2016, as reported by the Wall Street Journal,[70] Columbia University law professor John C. Coffee[71] provided a legal opinion regarding the Peruvian agrarian bonds.[72] His legal opinion advised that Peru’s disclosures provided to investors in their SEC prospectuses and prospectus supplements[73] were incorrect. Such disclosures claimed that the country was “not involved in any disputes with its internal or external creditors;[74]” but, citing a memo, among other things, from the MEF identifying at least 400[75] pending lawsuits and 47[76] unpaid judgments, Coffee concluded that such statement would be in violation of the Securities Act of 1933.
US-Peru Trade Agreement Implications[edit]
In February 2016, as reported in the Financial Times,[77] a Connecticut-based hedge fund filed a "Notice of Intent to Commence Arbitration Under the US-Peru Trade Agreement[78]".[79] Gramercy Funds Management filed this claim for $1.3 billion against Peru with respect to an alleged refusal to repay defaulted local bonds (agrarian reform bonds) at a reasonable rate.
https://en.wikipedia.org/wiki/Agrarian_Bonds_in_Peru
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