Holders of more than $6.1 billion of defaulted Argentine debt were added by a U.S. judge to a group of bondholders who must be paid before the South American country can pay its restructured debt.
The ruling Friday by U.S. District Judge Thomas Griesa in Manhattan puts additional pressure on Argentina to settle with holders of the defaulted debt, led by Paul Singer’s NML Capital. The decision means Argentina must reach a deal or pay $7.9 billion in defaulted bonds before it can resume interest payments on $28 billion of restructured debt.
Argentina claimed Griesa’s decision would make it harder to negotiate a settlement with bondholders.
At a hearing Wednesday, Carmine Boccuzzi, a lawyer for Argentina, had argued that adding to the list of investors blocking payments on the restructured debt would mean “spreading the veto power among hundreds of bondholders.”
A lawyer for NML argued that Argentina has showed no interest in discussing a possible settlement.
Record Default
Argentina defaulted on a record $95 billion in sovereign debt in 2001. It restructured most of the debt in 2005 and 2010. The holdouts, which include U.S. hedge funds, sued for full payment, citing an equal treatment -- or “pari passu” -- clause in the bond documents, which prevents Argentina from favoring later bondholders.
Griesa blocked Argentina from paying the restructured bondholders before holders of $1.7 billion of its defaulted debt, triggering the nation’s second default in 13 years in July 2014, when President Cristina Fernandez de Kirchner refused to comply. A group of 530 so-called me-too bondholders asked Griesa to add their claims to the group that must be paid in full.
“Today’s decision does not change the size of Argentina’s obligations,” Robert Cohen, an attorney for NML, said in a statement. “It merely confirms Argentina’s promise under the pari passu clause to treat its creditors equally.”
Argentina’s bonds have surged on the expectation that Fernandez’s successor, whose term is to begin in December, will resolve the holdout dispute and bring the country back to international capital markets.
Argentina’s presidential elections on Oct. 25 deepened investors’ optimism when Mauricio Macri, who has publicly vowed to settle the litigation, surprisingly finished in a near-tie with the ruling party candidate. The two are now slated to face each other in a runoff on Nov. 22.
The case is NML Capital v. Republic of Argentina, 14-cv-08601, U.S. District Court, Southern District of New York (Manhattan).