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Argentina deposited a $161mn payment on its restructured debt yesterday, defying a US judge who ruled it in contempt of court and ordered it to pay two “holdout” creditors first. |
The Argentine government, forced into default for the second time in 13 years as a result of the bitter legal dispute, said it had deposited the payment in a Buenos Aires account of the state-run Banco Nacion, just in time for a Tuesday deadline.
“By making said deposits, the Argentine Republic has once again demonstrated its unbreakable commitment to fulfil all its obligations to bondholders and contribute by any means available to preserve their right to collect payment,” the economy ministry said.
The South American country is trying to meet its obligations to creditors who agreed to take steep losses on their bonds after it defaulted on $100bn in debt during its 2001 economic crisis. But it has been blocked by US federal judge Thomas Griesa, who has ordered the country to repay two hedge funds demanding the full $1.3bn face value of their bonds before going ahead with the restructuring deals.
Griesa ruled on Monday that Argentina was in contempt of court after it passed a law allowing the government to repay creditors in Buenos Aires or Paris - skirting the New York judge’s freeze on the bank accounts it previously used to service its debt.
Argentine cabinet chief Jorge Capitanich brushed off the ruling, saying it had “no basis or impact.”
He repeated the foreign ministry’s statement that the contempt ruling violated international law.
“The judge has unleashed a true legal rigmarole. Every decision he makes gets worse,” Capitanich told journalists in Buenos Aires. He said any potential contempt penalties - which could amount to a $50,000-a-day civil fine, as requested by the hedge funds - would be “inapplicable.”
“Sovereign immunity law prohibits contempt penalties against foreign states,” he said. More than 92% of Argentina’s creditors agreed to take losses of up to 70% on the face value of their bonds in 2005 and 2010 in order to get the struggling country’s debt repayments back on track.
But the two hedge funds, US billionaire Paul Singer’s NML Capital and US-based Aurelius Capital Management, bought up defaulted Argentine bonds for pennies on the dollar and then refused to accept the write-down, taking the country to court.
The strategy, which stands to make them profits of up to 1,600%, has earned them the label “vulture funds” from Buenos Aires. Blocked from paying its restructured debt, Argentina missed a $539mn interest payment and entered default again on July 30.
It is now trying to buy time until the end of the year, the expiration date for a clause in the restructuring deals that entitles all bondholders to equal treatment.
