Argentina considers the issue of its payments to so-called “holdouts” closed and says those investors with bonds on which the country defaulted in its 2001 crash, and who did not participate in its 2005 and 2010 debt swaps, missed the boat. Tough.
It has even less time for the distressed-debt specialist “vulture funds”, even though Argentina has been ordered by court rulings in the US to pay out millions of dollars. One, Elliott Managemetn Corp’s NML Capital Fund, has amassed court rulings ordering Argentina to pay up $1.6bn. Argentina has not, and says it will not. But will it be able to?
If a court ruling from February 23 is upheld on appeal, Argentina must pay interest to Elliott before making any payment to holders of bonds issued in the 2005 and 2010 swaps.
As Bloomberg reports:
While the South American country is poised to pay $68 million in interest on restructured bonds on March 31, subsequent payments will be at risk if a Feb. 23 U.S. court decision is upheld on appeal. Argentina owes 7.4 billion pesos ($1.7 billion) in interest payments on restructured debt this year.
And as Anna Gelpern, a professor of law at American University and Georgetown University in Washington pointed out, the ruling may force Argentina to settle with Elliott to avoid default, and could set a precedent. She told Bloomberg:
This ruling is very significant because, for the first time in years, it gives a holdout creditor a generalizable enforcement strategy. If it stays, it could be generalized across a range of sovereign debt contracts and give holdouts a powerful remedy in a wide range of cases.
This seems rather to have upset the government, as the following opinion piece in business daily Ambito Financiero makes clear. In it, Argentina’s ambassador to Washington says Argentina could potentially be prevented from meeting payments to the World Bank, IMF and Paris Club.
That is slightly ironic, of course, given that Argentina has not yet paid the Paris Club after a decade of default, despite assurances that it is willing to pay.
Of course, it isn’t over yet. But Argentina’s plans to ignore vulture funds and let them stew may suddenly be under threat.
Argentina: ghosts of 2001 default linger, beyondbrics
Class-action plaintiffs won’t rush to Argentine debt swap, beyondbrics
Argentina to Greek investors: sometimes it pays to take a haircut, beyondbrics
Argentina: A high-risk recovery, FT
Argentina’s advice for Greece, beyondbrics
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