MercoPress. South Atlantic News Agency

Setback in New York court for Argentina’s strategy in its battle with bond holdouts

Billionaire Paul Singer head of NML Capital and a tenacious creditor of Argentina

A US court in New York on Tuesday rejected Argentina's request for a full-court rehearing of an appeal it lodged as it struggles to shake off holders of 1.3 billion dollars in defaulted bonds.

Argentina petitioned for the expanded re-hearing of the appeal, but the US Court of Appeals for the Second Circuit said the existing ruling by a three-judge panel, which requires Argentina to deal with all its debt holders equally, would stay in place.

“The petition is denied,” the court said in a brief written ruling.

Argentina defaulted on some 100 billion in debt in 2001, and has since restructured its debt twice, covering around 75% of the nominal value of the bonds and 93% of bondholders.

But hedge funds NML Capital and Aurelius Capital Management, which bought up some of the original defaulted debt at steep discounts, refused to go along with the restructurings and are suing to recover 100% of the bonds' value, a total of 1.3 billion.

In an October ruling, the appeals court upheld a lower court ruling that Argentina would have to repay both sets of the bonds. Argentina has separately been ordered by the appeals court to spell out how it will make its repayments.

Argentina says being forced to make full payouts on the bonds could strain the country's finances and force a new debt default, plus represent a negative record for any country wishing to restructure sovereign debts. In this last argument Argentina received a friendly support from the US government.

Argentina calls hedge funds ‘vulture funds’ and has repeatedly stated that it would ‘not pay a cent’ to the vultures, but later admitted to paying the holdouts but on similar conditions to the 93% of bondholders that showed trust in Argentina and accepted the restructuring.