MercoPress. South Atlantic News Agency

New York court lifts Argentine bond freeze

A New York appeals court lifted a freeze on $7bn of Argentine defaulted bonds, removing what Buenos Aires had claimed was an obstacle to completing its record $100bn debt-restructuring.

The decision is a clear victory for President Néstor Kirchner's administration, which is now expected to push ahead with completion of its debt swap as quickly as possible possibly even by next week.

Argentina's Merval stock index rose 3.8 per cent on the news.

In February the country persuaded bondholders with an overwhelming 76 per cent of the country's defaulted debt to participate in the restructuring. But it postponed completion of the exchange after some investors who rejected the offer obtained a court order to freeze $7bn of the defaulted bonds.

The appeals court's ruling on Friday stated that it had lifted the freeze "to avoid a substantial risk to the successful conclusion of the debt restructuring. . . That restructuring is obviously of critical importance to the economic health of a nation".

Indeed, experts consider completion of the exchange as the most important step to mending Argentina's relationship with international capital markets and the world economy.

That relationship has been in tatters ever since the country's financial collapse in December 2001, which ended with default and devaluation.

At a debt conference in Miami on Friday, Guillermo Nielsen, Argentina's finance secretary, said Argentina "could go to market sooner than most people expect because there is an appetite for Argentine debt". It was not clear, however, whether he had been informed of the court's decision when he made the comments.

But while the court's ruling will doubtless come as good news for the government and the hundreds of thousands of bondholders around the world who accepted February's offer, it is sure to come as a blow to creditors seeking redress through the courts.

Lawyers representing one of the plaintiffs in the case had stated earlier that seizing the defaulted bonds had represented "what may be their only chance to collect on their judgments". NML Capital, a Cayman Islands-based hedge fund, was the principal plaintiff in the case. NML, which is linked to Elliott Associates, the hedge fund that forced Peru to pay out about $50m in a landmark case during the 1990s, has claims against Argentina for more than $360m.

The fund was unavailable for comment on Friday. But experts say it is now unlikely NML will try to take this case further. Indeed, in an earlier statement several weeks ago the fund said it would respect the eventual decision of the appeals court.