Decision pushes country close to default again but President vows not to cough up the cash
By Nikhil Kumar
Rattled investors could be forgiven a sense of déjà vu after they were put on notice about the threat of a possible government default after Argentina was ordered immediately to cough up more than $1.3bn (£800m) to hedge funds that held out when it restructured its giant debt pile following a 2001 default.
Pending an appeals court decision, a New York judge has ordered Buenos Aires to pay the money due to the funds, including NML Capital, an affiliate of Elliott Management, a hedge fund, by 15 December. Elliott is often described as one among the so-called vulture funds that buy up debt issued by struggling countries and then pursue interest payments via the legal system. Recently, the fund has been reported to have waded into Greek debt.
NML’s lawyers have been aggressive in pursuing the case, most strikingly by winning an order earlier this year to have one of Argentina’s navy vessels impounded in Ghana as collateral.
At the heart of the case is the Argentinean debt restructuring of 2005 and 2010, when the country, seeking to put its house in order after enduring a deep economic slump and failing to repay its debts, struck deals with creditors who had lent it money, buying bonds that were subsequently defaulted on. The restructuring offered creditors part of what they were owed.
However, not everyone took part in the restructuring. Among the so-called “hold-outs” the biggest were NML and Aurelius Capital Management, who decided to go to court seeking payment on the bonds.
Years of litigation and much political posturing followed. Argentina’s outspoken leader Cristina Kirchner has fulminated against the legal actions and recently said her country would not pay “one dollar to the vulture funds” – until US District Court Judge Thomas Griesa ruled in favour of the funds earlier this year.