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November 1, 2014
Monday, June 16, 2014

US Supreme Court rejects Argentina appeal in bond fight

The US Supreme Court today declined to hear Argentina's appeal over its bid to avoid paying $1.33 billion to hedge fund creditors or risk a potential default.

Without comment, the high court left intact lower court rulings that ordered Argentina to pay. The government had previously warned it could default on its sovereign debt if required to pay in full.

Argentina said in its most recent court filing that the government would struggle to pay the bondholders in full while also serving its restructured debt. In that scenario, "Argentina will have to face, objectively, a serious and imminent risk of default," the filing said.

The bondholders dispute that assessment, saying in their own court filing there was evidence presented in lower courts that Argentina could afford to pay.

Argentina is seeking to avoid making full payment to holdout creditors led by hedge funds Aurelius Capital Management and NML Capital Ltd, a unit of billionaire Paul Singer's Elliott Management Corp.

Argentina was contesting an August 2013 ruling by the 2nd US Circuit Court of Appeals in New York in a decade-long legal battle with bondholders who rejected the country's two debt-restructuring offers after the country defaulted on roughly $100 billion in 2001.

Creditors holding about 93 percent of Argentina's bonds agreed to participate in the two debt swaps in 2005 and 2010, accepting between 25 and 29 cents on the dollar.

The appeals court upheld a November 2012 ruling by US District Judge Thomas Griesa, who ordered Argentina to pay the $1.33 billion into a court-controlled escrow account. He said Argentina must pay the bondholders who rejected the debt restructuring along with those who accepted.

The Supreme Court has another case related to the litigation currently before it. By the end of June, the court will decide in a separate case whether the bond investors can force banks in New York with which Argentina does business to disclose information about the country's non-US assets as the investors seek repayment.

The nine-member court also declined to hear a companion case filed by bondholders that did agree to restructuring. The court noted in its order that Justice Sonia Sotomayor recused herself from the cases.

The cases are Argentina v. NML and Exchange Bondholder Group v. NML, U.S. Supreme Court, 13-990 and 13-991.

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Tags:  US  Argentina  bondholders  holdouts  debt  restructuring  





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