Judge Griesa’s decision to be appealed by government
Argentina went to an appeals court in New York to challenge the ruling of US Judge Thomas Griesa, who last week issued a decision that raised the spectre of a technical default. A decade after committing the biggest sovereign default in history, Argentina faces another crisis after a US court ordered it to pay US$1.3 billion by December 15 to holders of defaulted bonds.
Last Wednesday, US District Judge Thomas Griesa ordered Argentina to pay the holdouts. Rather than trying to chip away at the edges of Griesa’s order, Argentina’s lawyers plan to challenge the whole opinion today in the US Second Circuit Court of Appeals.
About 93 percent of Argentine bondholders agreed in 2005 and 2010 to swap defaulted debt from the 2002 default for new paper at a steep discount.
So-called “holdout” creditors who rejected the swaps continue to battle in the courts for full repayment.
The argument to be put forth by Argentina “is simple and compelling,” said an article published in Página/12, a local daily newspaper with close ties to the Kirchnerite government.
“If the court accepts Griesa’s view, no country will be able to successfully restructure debt, as Argentina did, with a significant reduction in interest and an extension of payment schedules,” the story said.
“None of the owners of defaulted bonds would enter the exchange pending a court ruling that allows recovery of the whole of their claims,” it said.
Griesa’s decision on November 21 cited an appeals court ruling that said Argentina had discriminated against the holdouts. Now the Second Circuit Court of Appeals will decide if Griesa’s order should be carried out, considering the ramifications to the financial system.
The holdout investors in the case are led by NML Capital, an affiliate of Elliott Management, and Aurelius Capital Management, which are both based in New York.
At stake for all exchange bondholders is a potential technical default on approximately US$24 billion worth of debt issued in the 2005 and 2010 exchanges. Principal and interest payments due to those bondholders next month total more than US$3 billion.