U.S. Supreme Court takes no action on Argentina bonds case

WASHINGTON Tue Oct 1, 2013 11:30am EDT

WASHINGTON (Reuters) - The U.S. Supreme Court on Tuesday took no action on Argentina's appeal of a lower court ruling in favor of hedge funds that refused to take reduced payments under a restructuring agreement the country reached with other bondholders after its 2002 default.

The Argentine bond case was not mentioned in a list of new cases the court agreed to hear ahead of its new term, which starts on Monday, October 7. The court met on Monday to decide whether to hear the case.

Based on the court's usual practice, Tuesday's development may mean either that the court will decline to hear the case or that it will ask the Obama administration to weigh in on whether the dispute is worth the court's attention

The court's inaction delays any decision over the appeal of an October 2012 ruling by the 2nd U.S. Circuit Court of Appeals in New York that the Argentine government had broken a contractual obligation to treat bondholders equally.

In two restructurings, in 2005 and 2010, creditors holding around 93 percent of Argentina's debt agreed to participate in debt swaps that gave them 25 cents to 29 cents on the dollar.

But bondholders led by hedge funds NML Capital Ltd, a unit of Paul Singer's Elliott Management Corp, and Aurelius Capital Management went to court, seeking payment in full.

In related litigation, the appeals court in New York. In August issued another ruling, upholding a lower court's order that Argentina pay $1.33 billion to the holdouts. The court stayed its decision pending Supreme Court review. Argentina also has asked the appeals court to reconsider its decision.

"Any Supreme Court decision that extends this case over time, it's good for Argentina and for the holders of its exchanged bonds, as it will temporarily avert the risk of a technical default," said Ignacio Labaqui, who analyses Argentina for New York-based Medley Global Advisors.

Argentine local bond prices edged slightly higher after the Court's announcement and the country's international bond spreads tightened 13 basis points, outperforming JP Morgan's Emerging Markets Bond Index Plus

"If the Supreme Court requests the opinion of the Solicitor General it will probably be welcomed by markets," Labaqui added. "But if the Court declines to take the case it will not necessarily be bad for Argentina, because the country is still litigating in the 2nd Circuit."

Opinion is divided on whether the legal showdown threatens to undermine future restructurings worldwide.

The Obama administration backed Argentina in the lower courts but has not indicated where it stands now that the case is before the high court.

The International Monetary Fund has voiced worry that a ruling against Argentina would make it more difficult for other countries to restructure their debt in times of economic crisis.

Holdouts call that an exaggeration given the near universal use of collective action clauses in new bond deals saying that a minority of investors would not be able to holdout if a super-majority of creditors agree to restructure.

The case now before the Supreme Court is Argentina v. NML Capital, 12-1494. It was the high court's first meeting in three months to decide what cases to accept.

(Additional reporting by Hugh Bronstein in Buenos Aires; Editing by Howard Goller, Andrea Ricci and David Gregorio)

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Comments (4)
GermanHoldout wrote:
Beyond the hedge Funds there are tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

Hopefully the U.S. Supreme Court will reject on this Tuesday the Argentine complaint.

Many of the holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even over.

The following proposal below would be an acceptable solution for the Holdouts and probably also for Argentina:

I want the capital of my bonds back to 100% on 01/01/2015 (the end of “Rights Upon Future Offers (RUFO)”) What could be negotiable, are the outstanding interest between 2002 and 2014.

The U.S. Supreme Court should as soon as possible (hopefully on Tuesday) reject the Argentine complaint, and ORDER IMMEDIATE NEGOTIATIONS between Argentina and the Holdouts.

The Argentine government and the holdouts should make still this year a binding agreement with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO)” clause) with the advantage that seizure risks and a technical default would thus be immediately averted.

p.s Holdouts are not vultures!

Oct 01, 2013 11:08am EDT  --  Report as abuse
GermanHoldout wrote:
Beyond the U.S. Hedge Funds there are tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

We all want justice and our money back. We all hope in the US justice system and the Obama Administration.

Hopefully the U.S. Supreme Court will reject on this Tuesday the Argentine complaint.

Many of the holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even over.

The following proposal below would be an acceptable solution for the Holdouts and probably also for Argentina:

I want the capital of my bonds back to 100% on 01/01/2015 (the end of “Rights Upon Future Offers (RUFO)”) What could be negotiable, are the outstanding interest between 2002 and 2014.

The U.S. Supreme Court should as soon as possible (hopefully on Tuesday) reject the Argentine complaint, and ORDER IMMEDIATE NEGOTIATIONS between Argentina and the Holdouts.

The Argentine government and the holdouts should make still this year a binding agreement with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO)” clause) with the advantage that seizure risks and a technical default would thus be immediately averted.

p.s Holdouts are not vultures!

Oct 01, 2013 11:19am EDT  --  Report as abuse
Myfourcents wrote:
So, now you are dictating to a “Country” to do what you want?. You are better to just hold the worthless paper you are hanging on.
Others got equal money and you guys want 1400% of what you invested, Wow!. Shameless Vultures!

Oct 01, 2013 11:51am EDT  --  Report as abuse
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