Argentina’s government argued that the judge’s remedy would make it impossible for other nations to negotiate better terms when their economies sink too deeply to maintain foreign debt payments. If upheld, the ruling would give all the power in such talks to a small minority of bondholders who refuse to accept anything less than full payment for their investment.
The holdouts, led by NML Capital Ltd., an investment fund controlled by U.S. billionaire Paul Singer, want to be paid the full originally promised value, plus interest, for defaulted bonds that Argentina hasn’t made payments on since its 2001 debt crisis. They have argued that with more than $43 billion in foreign reserves, the government is more than capable of paying them.
Instead, the government is offering the same terms that 92 percent of other bondholders accepted years ago, saying it can issue the plaintiffs new bonds that are worth far less than the 1990s debt, reflecting Argentina’s post-crisis economic reality. Argentina’s peso, for one, lost most of its value after its historic debt default, and has never fully recovered, despite years of growth that the debt restructurings fostered.
Both sides have 15 minutes for oral arguments on Feb. 27 before the full appellate court in the southern district of New York. A three-judge panel of the same court has already sided against Argentina, which is determined to take its case all the way to the U.S. Supreme Court if necessary.
Argentina’s refusal to pay the holdouts prompted Griesa to propose an unprecedented remedy: He would make U.S. financial institutions responsible for satisfying the plaintiffs by diverting the money Argentina intends to pay to its other bondholders who accepted the restructuring.
“When a country’s debt is truly unsustainable, short of really positive unforeseen changes ... debt must be restructured,” Argentina’s brief argues.
Judge Griesa’s remedy, however, would “reduce prospects for growth in developing countries, increase the costs to creditors and debtors of debt resolution, harm the international sovereign debt market, and reduce the ability of the private international capital market to enhance the growth of developing countries,” it said.
Argentina’s brief concludes that “the essence of a judicially crafted equitable remedy is that it be fair to all concerned, not just to the plaintiff who seeks it, and that it do no more harm than the harm it is designed to remedy.”
The plaintiffs also include working-class Argentines such as retiree Maria Munoz, 76, who invested $65,000 in the bonds in 1998, only to see her retirement money disappear. The American Task Force Argentina, a lobbying group Singer funds, flew her and other Argentines up to New York and Washington last week to help make their case.
“I don’t want to harm anybody else, but I don’t want to be harmed either,” Munoz told The Associated Press. “I want whomever has to decide this case to think about the people, not just the figures, because behind these figures there are human beings.”
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