MercoPress. South Atlantic News Agency

English court involved in Argentine bonds dispute with hedge funds

The lawsuit involves 226m Euros interest payments on Euro-denominated Argentine bonds issued under English law. One of the litigants is George Soros

A London court gave Argentine “holdout creditors” in New York a two-week window on Thursday to challenge declarations sought by a powerful group of investors in a dispute over interest payments worth about 226 million Euros. The payments involve Euro-denominated Argentine bonds which were issued under English law.

 Investment firms including George Soros's Quantum Partners, Knighthead Master Fund and Hayman Capital, have filed a lawsuit in the UK asking the court to declare that the interest payments are subject to English law and that any attempt by a foreign court to modify contracts governing them would be ineffective.

The litigations stem from Argentina's historic sovereign debt default in early 2002.

The holdout creditors are fighting another legal battle in New York and Quantum and the other investors want to make sure that any U.S. ruling does not affect their interest payments.

Although defendant and originally Argentina's trustee Bank of New York Mellon Corp has opposed the UK case, Judge Guy Newey said there was broad agreement between the two parties that the payments are subject to English law.

But he added: ”I might add that the very fact that the bank has thought it worth opposing the making of the declaration (while not disputing its substance) tends to confirm me in the view that the declaration would serve a useful purpose.”

Judge Newey told holdout creditors, investors who did not take part in the country's debt restructurings of 2005 and 2010 and sued for full repayment, to speak with legal advisors by Nov. 21 if they wished to intervene.

The next hearing in London's High Court is scheduled for the second half of December.

The holdout investors are led by NML Capital, an affiliate of billionaire Paul Singer's Elliott Management and Aurelius Capital Management, headed by Mark Brodsky, formerly of Elliott.

Argentina was declared in default in July after refusing to honor a U.S. court order to pay 1.33 billion dollars plus interest to holdout bondholders when it paid holders of bonds swapped during the 2005 and 2010 debt restructurings.

The U.S. court had ordered the country to treat the hedge funds pari passu - on equal terms - with the restructured bond holders, i.e. it was not to pay holders of restructured debt without paying the hedge funds at the same time.