GREENWICH, Conn., July 6, 2016 /PRNewswire/ -- Gramercy Funds Management LLC and Gramercy Peru Holdings LLC (collectively, "Gramercy") today released the following statement regarding Peru's Response to Gramercy's Notice of Arbitration and Statement of Claim filed on July 5, 2016 ("Peru's Response"). The matter involves Gramercy's investment in Peruvian Agrarian Reform Bonds (the "Land Bonds") and Gramercy's filing of a $1.6 billion claim against the Republic of Peru for violations of the U.S.-Peru Trade Promotion Agreement (the "Treaty").
Gramercy continues to welcome any discussion concerning the current situation of the Land Bonds. However, once again, we are disappointed by Peru's Response and feel compelled to correct a number of factually inaccurate statements.
First, the suggestion by Peru's Ministry of Economy and Finance (the "MEF") that Gramercy's acquisition of the Land Bonds is somehow "speculative" because it has only provided a copy of one single bond is nonsensical. As part of its Notice of Arbitration and Statement of Claim, Gramercy provided the MEF with an audited inventory of the nearly 10,000 Land Bonds it owns (which includes bond number, class, issuance date, face value, and number of clipped coupons, among other information). This information was already provided to the MEF in March 2010, more than six years before the arbitration was commenced. Perhaps more troubling is the fact that Peru has been a party to the local proceedings with Gramercy for many years and, during that period, the MEF has never disputed Gramercy's entitlement to the Land Bonds. In its capacity as a party to the proceedings, Peru has had full access to all the documents provided by Gramercy, including the contracts for the assignment of rights in the Land Bonds acquired by Gramercy. In fact, the MEF attached one such contract to Peru's Response. As Gramercy has indicated, should the Tribunal find it helpful, Gramercy is willing to make available copies of all the Land Bonds that it owns. However, the MEF already has access to detailed information about all the Land Bonds owned by Gramercy.
Second, the proposition that the proceedings suffer from "grave jurisdictional deficiencies and a failure to respect critical Treaty requirements" demonstrates the MEF's attempt to use procedural tricks to excuse itself from addressing the core substantive issues in the case. Gramercy has complied with all of the Treaty's jurisdictional and procedural requirements, and is confident that the Tribunal will ultimately reject Peru's objections. Conspicuously absent from Peru's Response is any attempt to account for the irregularities in procedure leading up to the July 2013 Constitutional Tribunal Order including the multiple forgeries indisputably illustrated by photographic evidence. The MEF has also failed to explain its justification for the devastating effect that the valuation formula contained in the Supreme Decrees has on the value of the Land Bonds. Although the MEF specifically makes reference to Bond No 008615 (pictured below) as the "lone bond," it continues to evade addressing Gramercy's statement last month that Bond No 008615 is worth US $16,161 under the Consumer Price Index (CPI) methodology but less than one penny under the MEF valuation formula. We once again challenge the MEF to publicly state the amount it is offering to compensate Gramercy for Bond No 008615 under its current formula set forth in the 2014 Supreme Decrees.
Third, the MEF's statement that it has authenticated 10,000 Land Bonds is, while factually accurate, also misleading and disingenuous. Based upon a July 2015 letter produced by the MEF, it is clear that the Land Bonds tendered by bondholders into the current sham "process" have an aggregate face amount of approximately 136 million Soles de Oro. Further, according to a 2006 report issued by the Peruvian Congress' Agrarian Commission, the total outstanding Land Bonds represent an aggregate face amount of approximately 2.4 billion Soles de Oro. Therefore, the 10,000 Land Bonds cited by the MEF account for less than 5% of the total face amount of Land Bonds outstanding. Additionally, the July 2015 MEF letter states that less than 230 individual bondholders actually submitted to the sham "process"—presumably investors that could not decipher the complex and predatory mathematical formula authored by former Minister Luis Castilla and published by the MEF. More importantly, this small group of bondholders most likely did not realize that they surrendered their rights in order to participate in the MEF sham "process." We challenge the MEF to publicly disclose the amount it is offering to pay with respect to these 10,000 Land Bonds and to state how it intends to address the remaining 95% of Land Bonds outstanding.
For copies of the MEF's July 2015 letter and the 2006 Congressional report, please refer to the following links:
Fourth, the MEF has again accused Gramercy of engaging in a "negative media campaign" against Peru and of constructing the proceeding "on the foundation of an attack campaign." Gramercy has never engaged in a campaign "to harm Peru." To the contrary, Gramercy has the greatest respect for Peru. It has only engaged publicly in general discussion about its claims and its positions in the arbitration and has raised awareness among the public and interested parties of the Land Bonds. Not only is it a matter of public concern, but the Treaty explicitly provides for the transparency of arbitration proceedings, including the publication of all party pleadings, memorials, and briefs. Gramercy again invites the MEF to identify any Gramercy statement that is factually inaccurate.
Finally, the MEF's contention that Gramercy has refused to engage in good faith negotiations with Peru is demonstrably false. Gramercy has been seeking amicable discussions with the MEF for over six years. Yet, in all that time, the MEF has not been willing to have a single meeting with Gramercy to discuss the substance of its concerns on how to resolve the Land Bond issue. Following the filing of its Notice of Intent to Commence Arbitration in February 2016, Gramercy again actively sought amicable negotiations with the Special Commission that represents the State in Investment Disputes (the "Commission"), and proposed not to commence arbitration in order to facilitate discussions. Far from seeking to impose an "overbroad waiver of its rights" as the MEF contends, Gramercy proposed a standard "tolling agreement" to suspend the running of the Treaty's three-year statute of limitations. After months of negotiations, the MEF ultimately refused to sign the agreement proposed by Gramercy, substituting it in the eleventh hour for a new and totally unacceptable proposal that sought to impose unreasonable contractual obligations on Gramercy that are outside the scope of any standard tolling agreement. We once again invite the MEF to provide the public with copies of all written correspondence with Gramercy.
Despite the foregoing, Gramercy continues to believe that a consensual and amicable solution to this problem will benefit not only Gramercy, but also Peru, as well as all bondholders. Gramercy reiterates that, if at any time the current or the next administration wishes to change this approach and work constructively to find a solution, Gramercy will of course welcome those efforts.
Gramercy is a US $6.3 billion dedicated emerging markets investment manager based in Greenwich, CT with offices in London, Hong Kong, Singapore and Mexico City, and a presence in Lima and Buenos Aires. The firm, founded in 1998, seeks to provide investors with superior risk-adjusted returns through a comprehensive approach to emerging markets, supported by a transparent and robust institutional platform. Gramercy offers both alternative and long-only strategies across all emerging markets asset classes including USD debt, local currency debt, high yield corporate debt, distressed debt, equity, private equity and special situations. www.gramercy.com
SOURCE Gramercy Funds Management