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Saturday, November 17, 2012

Argentina asks US judge to wait for bond dispute appeal

Argentina asked a US judge late last night to maintain his order blocking payment on defaulted sovereign bonds to holdout investors until lingering questions are settled in a higher court's appeals process.

Less than 15 minutes before a midnight deadline, Argentina's lawyers filed their brief outlining why US District Judge Thomas Griesa should reject the argument by holdout creditors to pay them in full on debt that has been in default since 2002.

The arguments came three days after Argentina asked the US 2nd Circuit Court of Appeals in New York to reconsider its October 26 ruling that favoured these holdout bondholders and rattled financial markets in the process.

That decision upheld the ruling, that was made by Griesa, that found the South American nation discriminated against bondholders such as Elliott Management Corp's NML Capital Ltd and Aurelius Capital Management. They refused to take part in two debt restructurings as Argentina tried to recover from a US$100 billion default a decade ago.

Greisa had put his own ruling on hold pending the appeal and Argentina yesterday argued he should keep the freeze in place until outstanding issues were settled.

"The Court should not accept the false urgency plaintiffs are trying to create and allow the Republic and all potentially affected third parties to prosecute their appeal rights before any orders go into effect," Argentina said in its brief.

After the 2nd Circuit's ruling, Argentine officials were widely cited in the media saying they would flout the court and continue to pay investors who participated in the debt swaps but would never pay the holdout investors.

That prompted Griesa to demand a direct government pledge to comply with his orders.

National Director of Argentina's National Bureau of Public Credit, Francisco Eggers, submitted a signed affidavit saying the government would abide by the court's rulings and not seek to evade its directives.

"As directed by the court, on behalf of the Republic, I confirm that the Republic has complied, and will comply with the terms...," Eggers said.

Last month's ruling led to fears US courts could ultimately inhibit debt payments to creditors who accepted the terms of the restructuring, out of consideration for investors who rejected Argentina's terms at the time.

This would trigger a technical default on approximately US$24 billion worth of debt issued in the 2005 and 2010 exchanges.

"It is far beyond the bounds of equity to seek to enforce the rights of one litigant by jeopardizing the rights of others," lawyers representing a group of bondholders who participated in the exchange, led by Gramercy Funds Management LLC., said today.

The briefs from Argentina and the exchange bondholders addressed two questions that the appeals court had referred back to Griesa for answers.

These were technical questions of how debt payments would be calculated and how to treat the involvement of third-party banks such as Bank of New York Mellon, which act as transfer agents for money owed to exchange bondholders.

Argentine President Cristina Fernandez said immediately following the October decision her country would not pay "one dollar to the vulture funds". That is her term for holdout investors who buy distressed or defaulted debt and then sue in international courts to get paid in full.

Eggers' statement contrasted with Fernandez's vow to keep making payments to other creditors.

Argentine bonds closed up 1 percent on average in over-the-counter trading in Buenos Aires yesterday after accumulating a loss of 4.1 percent in the previous three sessions.

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Tags:  US  judge  Griesa  payment  defaulted  court  appeal  process  





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Edition No. 5055 - This publication is a property of NEFIR S.A. -RNPI Nº 5343955 - Issn 1852 - 9224 - Te. 4349-1500 - San Juan 141 , (C1063ACY) CABA - Director Perdiodístico: Ricardo Daloia