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October 25, 2014

US Supreme Court

Monday, February 17, 2014

Country to lodge holdout debt appeal tomorrow

Argentina will tomorrow file an appeal before the US Supreme Court, requesting a review of the US District court order from 2012 that requires it to pay US$1.33 billion to “holdout” bondholders. Known as “vulture funds” in Argentine political vernacular, the bondholders are demanding 100 percent payment from Argentina plus interest.

The country technically had until today to lodge an appeal with the US Supreme Court, but given the public holiday — Presidents Day — in the US, this deadline will be pushed back until tomorrow, according to Reuters.

The expected filing will be made via US lawyer Paul Clement.

One of the best-known lawyers in the United States and a solicitor general under President George W. Bush, he is seen as a potential candidate to fill a Supreme Court vacancy if a Republican becomes president in 2017. Clement has presented 41 cases to the Supreme Court, 16 of those in the past year, state news agency Télam reported.

The closely watched litigation has triggered concerns about a potential new debt crisis in Argentina, as well as worries that it may set a precedent for other future sovereign debt restructures.

The bondholders — called “vulture funds” by Argentine President Cristina Fernandez —refused to participate in two debt restructurings spinning out of the country’s US$100 billion 2002 default.

Most creditors agreed to participate in debt swaps in 2005 and 2010 which gave them 25 to 29 cents on the dollar.

But, led by the hedge funds NML Capital Ltd, which is a unit of Paul Singer’s Elliott Management Corp, and Aurelius Capital Management, the holdout bondholders are demanding payment in full.

Argentina’s first appeal was thrown out by the 2nd US Circuit Court of Appeals in New York in November, which set the stage for the country to take its appeal to the US top court.

The Supreme Court likely will not decide whether to hear the case until later in the year. If the justices do agree to hear the case, they are unlikely to hear oral arguments and issue a ruling until the court’s new term begins in October 2014.

The US Supreme Court previously declined to hear an earlier appeal by Argentina in October, considered premature by analysts as lower court appeals were still unresolved.

The Argentine government is in desperate need of good news — and dollars. The economy is facing its second major economic crisis in little more than a decade. Reserves are falling, the currency is volatile and inflation is rising fast. It is also eager to regain access to the international capital markets.

It is negotiating the repayment of US$9.5 billion it owes the Paris Club of creditor nations.

—Herald with Reuters, Ámbito.com

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