Argentina Vows To Resist Debt Demands Despite Risk Of Default
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In the latest salvo of a bitter high-stake legal fight, attorneys for the Argentinean government on Wednesday told a U.S. appeals court that the nation would rather default on nearly $1.3 billion in sovereign debt than pay off a group of minority bondholders – mostly hedge funds – who had ignored two previous debt exchange offers in favour of pursuing full repayment.
In the latest salvo of a bitter high-stake legal fight, attorneys for the Argentinean government on Wednesday told a U.S. appeals court that the nation would rather default on nearly $1.3 billion in sovereign debt than pay off a group of minority bondholders – mostly hedge funds – who had ignored two previous debt exchange offers in favour of pursuing full repayment.
Jonathan Blackman, the lead attorney for the South American nation, said that the government would not “voluntarily comply” with any U.S. court ruling as it “fundamentally violates their principles”; though he insisted that Argentina was open to a solution that is “workable and doesn’t create a terrible confrontation”.
Last November, New York district judge Thomas Griesa ruled that Buenos Aires had an obligation to pay off the holdout bondholders in full (plus interest), even though 92 percent of the other bondholders had already agreed to lower restructured debt repayments.
The New York district judge also ordered Argentina not to pay back the 92 percent, unless the nation could reach an agreement with the holdouts; raising the risk that the country could default on nearly $24 billion in debt – the second time Argentina would have done so in 11 years.
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Blackman claimed that Griesa’s ruling had violated Argentina’s sovereignty and would quadruple the number of Argentine bond cases in New York federal court, rather than resolving them.
[quote]“If that’s the confrontation the court seeks with the injunctions, that is the court’s decision,” Blackman said, as cited by Bloomberg. “We’re representing a government and governments will not be told to do things that fundamentally violate their principles.”[/quote]“We would not voluntarily obey such an order,” he added, when asked whether there was any chance the country would accept the previous ruling.
Argentina defaulted on some $100 billion in debt in 2001, and has since restructured its debt twice, covering around 75 percent of the nominal value of the bonds. Among the holdouts include hedge funds, such as Elliot Capital Management and Aurelius Capital Management, who have a reputation for purchasing debt issued by struggling countries, before pursuing interest payments via legal recourse.
“These funds are vultures who seek to profit by betting on a technical default,” said Argentina’s Economy Minister Hernán Lorenzino last year, as cited by The Guardian.
[quote]“To pay the vultures is not only unfair but illegal in terms of our internal rules,” he said. “We will continue to defend the position of Argentina in all forums and with all available legal instruments.”[/quote]Related: A History of World Financial Crises
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U.S. Circuit Judge Reena Raggi, who was at the appeal, however said that a court’s role was to enforce contracts, “not to rewrite them”.
She said it “hardly seems appropriate for a court not to enforce one of its orders, because a party will breach another of its obligations”.
Theodore Olson, a lawyer representing the dissident bondholders, also claimed that while Argentina’s government “had every opportunity, over and over, Argentina never made any proposal.”
[quote]”The hostage holding is being done by Argentina,” he said. “Argentina would be vastly better off if it started to pay its obligations.”[/quote]Another group of attorneys, representing the 92 percent of bondholders who had agreed on debt restructuring, also challenged the previous ruling that they could not receive repayment, until a deal was reached between Argentina and the holdouts.
“We’re innocent parties,” attorney David Boies argued for the so-called Exchange Bondholder Group. “I represent people who did what they thought was right. All I’m saying is what they did shouldn’t count against them.”
[quote]“If you allow Judge Griesa’s injunction to exist unchanged, everybody in this courtroom knows what’s going to happen,” Boies added. “Argentina is going to default.”[/quote]
