Argentina has made its final written arguments ahead of a February 27 US courtroom showdown against holdout bondholders demanding full payment of capital plus interests for sovereign debt from the default of more than a decade ago.
Oral arguments in the case, which could raise emerging market sovereign borrowing costs by complicating future restructurings, are set for the end of this month before the US 2nd Circuit Court of Appeals in New York.
Argentina wants the court to overturn a finding in favour of creditors led by NML Capital Ltd and the Aurelius Capital Management funds, known as holdouts because they did not participate in restructurings under which most holders of Argentine bonds accepted reduced terms in return for payment. The government of President Cristina Fernandez calls them ‘vulture funds’.
The case, in which the holdouts are asking for 1.33 billion dollars, stems from Argentina's 100 billion debt default in 2002. It has been pursued in US courts because they have jurisdiction under Argentina's bond contracts.
NML and Aurelius call it unfair for Argentina to pay investors who accepted restructured terms without paying them as well. Argentina dismisses the argument.
For all plaintiffs' talk about 'equal treatment,' what they really want is ... to enforce their contractual right to be paid a defaulted debt, Argentina said in a filing made just before midnight on Friday.
Any actual claim to 'equal treatment' would be satisfied by treating all holdout creditors on the same terms as the participants in the republic's 2010 exchange offer, it said.
Anything else is not equal treatment, but a preference that would violate Argentine law and public policy as well as fundamental principles of inter-creditor equity, it argued.
The case is seen as having broad reach. In court papers last year, the US government said that to award full payment to the holdouts could harm the finances of emerging market countries and throw a wrench into the international capital markets by complicating future sovereign debt restructurings.
NML and Aurelius refused to take part in Argentina's 2005 and 2010 restructurings, in which about 92% of holders received between 25 cents and 29 cents on the dollar.
The 2nd Circuit issued a decision in October finding that Argentina must treat all bondholders equally, rather than allow holders of restructured debt to have priority. That upheld earlier decisions by US District Judge Thomas Griesa in Manhattan, who oversees much of the litigation.
Then in November, Griesa ordered Argentina to pay 1.33 billion into escrow for the holdouts when it paid restructured bondholders. The 2nd Circuit put that order on hold so Argentina could appeal, setting the stage for the Feb. 27 hearing.