Rul­ing leaves mas­sive debt for the next Ar­gentina gov­ern­ment


A new rul­ing by a U.S. judge has in­creased the to­tal Ar­gentina owes hold­out bond­hold­ers to US$5.2 bil­lion — a mas­sive re­spon­si­bil­ity that if up­held likely will fall to the next gov­ern­ment, ex­perts said.

In a 26-page rul­ing, U.S. Dis­trict Court Judge Thomas Griesa con­cluded Fri­day that by re­fus­ing to make pay­ment to some hedge fund and in­di­vid­ual bond­hold­ers of its de­faulted debt, while mak­ing pay­ment to other cred­i­tors, Buenos Aires was in vi­o­la­tion of an equal treat­ment pro­vi­sion in its con­tracts.

Griesa in a 2012 rul­ing sided with a group of hedge funds, led by NML and Aure­lius Cap­i­tal Man­age­ment, who for years have been try­ing to force Ar­gentina to pay off US$1.3 bil­lion in de­faulted bonds they hold.

The judge said that his 2012 rul­ing should also ap­ply to more than 500 “me-too” bond­hold­ers who were not cov­ered un­der the orig­i­nal de­ci­sion.

Ar­gentina has re­fused to pay the two hedge funds, ar­gu­ing that they re­lin­quished their claim when they re­fused to join a re­struc­tur­ing of nearly US$100 bil­lion in debt the coun­try de­faulted on in 2001.

Un­der mount­ing pres­sure, the Ar­gen­tine gov­ern­ment was quick to slam the lat­est rul­ing and said it would ap­peal, brand­ing Griesa’s rul­ing “il­le­gal” and “un­for­tu­nate.”

Buenos Aires has con­sis­tently ac­cused the judge of bias.

Griesa has said he wants to deal with 100 per­cent of the hold­outs.

But those ben­e­fit­ing from Fri­day’s rul­ing are about one-third of the hold­outs, ac­cord­ing to Du­jovne.

Some an­a­lysts pre­dicted the legal wran­gling could drag on for years.

Ar­gentina’s Pres­i­dent Cristina Kirch­ner was elected in 2011 for a sec­ond term and un­der the con­sti­tu­tion is not per­mit­ted to run for a third when elec­tions are held in Oc­to­ber this year, which means the coun­try’s debt mess likely will have to be sorted out by her suc­ces­sor.

Last month, Ar­gentina’s econ­omy min­is­ter went to the United Na­tions to ac­cuse so-called vul­ture funds of gain­ing “ex­tor­tion­ate power” over coun­tries seek­ing to re­struc­ture sovereign debt.

With the coun­try still re­fus­ing to pay, last year U.S. courts gave the hedge funds the right to seek out and iden­tify Ar­gen­tine as­sets they might be able to seize. NML took sim­i­lar ac­tion in Bel­gium in 2012, but a lo­cal court ruled against the com­pany on the grounds that the 1961 Vi­enna Con­ven­tion pro­hib­ited the seizure of diplo­matic prop­erty.

In 2012 NML also per­suaded a court in Ghana to hold a 103-me­ter ( 338- foot) Ar­gen­tine navy train­ing ship in port. Later the Ghana supreme court al­lowed the ves­sel to leave.

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