MercoPress. South Atlantic News Agency

Holdout funds want Argentina to deposit 250m by December 10

Paul Singer from NML Capital is asking for a proof of good faith from Argentina

Investment funds suing over Argentina's 2002 debt default have asked a US court to order the country to post a security deposit of at least 250 million dollars by December 10, while an appeal of a lower court's order is pending.

In an emergency motion filed late on Friday, the “holdout” creditors urged the 2nd U.S. Circuit Court of Appeals to modify its ruling from Wednesday that halted an order for Argentina to deposit 1.33 billion into an escrow account by December 15 on the investors' behalf.

The decision eased fears that Argentina could default in the coming weeks, but the holdouts say it is too lenient and gives the government more time to plot a way around court rulings.

The holdouts are seeking to be repaid in full on their defaulted Argentine bonds after spurning debt exchanges in 2005 and 2010 that about 93% of other bondholders accepted. Argentina calls the litigating funds “vultures” and has vowed never to pay them.

The latest battle centers on a ruling that found Argentina violated a bond provision requiring it treat all creditors equally when it paid the exchange bondholders without paying the holdouts. Two US courts have said they should all be paid simultaneously.

On November 21, U.S. District Judge Thomas Griesa ordered Argentina to deposit the 1.33 billion for holdouts including NML Capital Ltd and the Aurelius Capital Management funds by December 15, the same day about 3 billion comes due on growth-linked GDP warrants, issued during Argentina's debt swaps.

This raised fears of another default because if Argentina had refused to pay the holdouts, as expected, US courts could have disrupted payments to the holders of restructured bonds.

Argentina appealed the orders and won an emergency stay, or halt, from the 2nd Circuit Court.

NML and Aurelius argue, however, that Argentina should have to post a security deposit of 1.45 billion, or at least 250 million, by December 10 to ensure the country complies with the court orders if it loses the appeal.

“If Argentina refuses to post even that minimal security even as it prepares to pay more than 3 billion to exchange bondholders, that will amply demonstrate its intention not to comply with this court's mandates and that the stay should be lifted,” lawyers for the holdout investors wrote.