A judge sided with Argentina in its debt standoff on Wednesday, agreeing to let orders protecting creditors expire so that large U.S. hedge funds and smaller entities and people can be paid at least US$6.2 billion to satisfy settlements reached over the last month.
U.S. District Judge Thomas Griesa in Manhattan wrote that circumstances have changed so significantly after years in which Argentina refused to negotiate with creditors that his earlier orders have become detrimental to the public interest. He said Argentina also needs time to raise money to pay the creditors, especially since one of the largest deals calls for payment in six weeks.
His ruling came despite requests from lawyers representing a majority of the creditors for him to keep in place orders that protect creditors until the remaining 15% of bondholders protected by the court actions can settle their claims.
On Tuesday, the judge heard those lawyers ask for a month long delay of a decision to lift his orders. He has said his orders protecting creditors can expire once Argentina clears legislative obstacles and makes full payment on deals it reached by Monday.
Creditors holding about US$8 billion in bonds have settled. Remaining creditors hold less than US$2 billion in bonds.
The creditors went to court in New York after Argentina in 2001 defaulted on US$100 billion in bonds. Argentina invited all its bondholders to swap their bonds at steep discounts for new bonds in 2005 and 2010.
The judge's orders blocked Argentina from making payments through U.S. financial institutions to roughly 93% of its bondholders who agreed to exchange their bonds for 25% to 29% of their original value. He said Argentina would have to pay those who refused the swaps all of their investment or negotiate a deal with them.
For years, Argentina refused, but that suddenly changed when President Mauricio Macri took office on Dec. 10.
The judge noted that Macri addressed the Argentine Congress on Tuesday to urge approval of settlements. The judge also said he expects Argentina to continue to negotiate with those plaintiffs who have not settled.
Some lawyers for plaintiffs complained Tuesday that they had not had a chance to negotiate with Argentina because larger bondholders got to meet with the court-appointed mediator first. The judge said Wednesday that those claims are exaggerated.
The injunctions at issue prevented Argentina from servicing its restructured debt until it paid the holdout investors