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US hedge funds reject Argentina’s offer to settle defaulted sovereign bonds suit

Saturday, April 20th 2013 - 08:39 UTC
Full article 31 comments
NML Capital and Aurelius, which are seeking 1.3 billion dollars, had been expected to reject the offer NML Capital and Aurelius, which are seeking 1.3 billion dollars, had been expected to reject the offer
The Cristina Fernandez government contends that its offer satisfied the requirements of the “pari passu” or equal treatment clause The Cristina Fernandez government contends that its offer satisfied the requirements of the “pari passu” or equal treatment clause

Two US hedge funds suing Argentina for full payment on defaulted bonds rejected on Friday, President Cristina Fernandez government offer to settle the suit with a deal that would give them approximately 25% of what they were seeking.

”Argentina's years of defiance cannot be cured by a convoluted offer to give (the bond-holders) yet more Argentine IOUs, worth pennies-on-the-dollar,“ the hedge funds said in a petition filed to a New York court.

That Buenos Aires still has not accepted a court order to pay the bonds in full ”only serves to demonstrate that it does not respect its voluntarily assumed obligations or the rule of law.“

”The district court's injunction was in no sense an abuse of discretion, and should be affirmed,“ the court document said.

US hedge funds NML Capital and Aurelius, which sued Argentina seeking 1.3 billion dollars, had been expected to reject the offer.

Argentina had sought to repay them on similar terms to the majority of holders of bonds who had accepted a bond restructuring after the country defaulted on 100 billion in debt in 2001.

Buenos Aires was able to get acceptance from about 92% of its bondholders for the two restructurings, in 2005 and 2010.

The hedge funds, which Buenos Aires labels ”vulture funds,“ had bought their bonds on the market at a discount and did not participate in the restructuring. Instead they went to court to seek full repayment.

According to the funds, the value of the bonds is now 1.47 billion dollars.

However, Argentina worries that full repayment would require it to repay the restructured bonds in full as well, which some analysts say could force the country back into default.

Argentina contended that its offer to the two hedge funds satisfied the requirements of the ”pari passu“ or equal treatment clause under which the bonds were issued: ”non-discrimination in payment priority and equal treatment among bondholders.”

The case could have repercussions for the greater market for sovereign bonds, if investors believe that holdouts from post-default restructuring deals could ultimately get special treatment.

That could prevent any such deals from being achieved, though some analysts -- and the two hedge funds which sued -- argue the Argentina case would not stand as a model.

The filing, which came three days before it was due, paves the way for a ruling by the appeals court in the case. Argentina has said it won’t voluntarily obey a ruling that forces it to pay holders of the defaulted bonds. The nation’s legislature in 2005 passed a so-called lock law barring payment.

The creditors want the appeals court to uphold rulings by U.S. District Judge Thomas Griesa in Manhattan. Griesa said that Argentina must pay them the entire amount they’re owed whenever it makes a required payment to holders of its restructured debt.

That ruling is on appeal before a three-judge panel of the appeals court, which heard arguments in the case in February.

The Exchange Bondholder Group, which accepted the deal offered by Argentina for their bonds, claimed Griesa’s rulings threaten their investment.
 

Top Comments

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  • yankeeboy

    Well there is a surprise!
    Not!

    Rut ro

    The only U$45 B CFK has is in her own personal account
    do you think she'll use that?
    yeah sure

    Apr 20th, 2013 - 10:37 am 0
  • mastershakejb

    Cristina's gonna need another facelift surgery to pick her spirits back up after this

    Apr 20th, 2013 - 11:43 am 0
  • Porto Margaret

    Keep the heat on the KFC clique. Sweat them until they pay up.

    It keeps this shabby regimes underhand financial dealings in the spot light as a continual warning to all other international institutions.

    Drag it out Pinocho, your reputation is further debased.

    Apr 20th, 2013 - 11:58 am 0
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