UPDATE 3-Argentina to file bond petition to U.S. top court next week -report

Tue Feb 11, 2014 11:59am EST

BUENOS AIRES Feb 11 (Reuters) - Argentina will file a petition seeking U.S. Supreme Court review of a court order requiring it to pay $1.33 billion to 'holdout' bondholders at the deadline next week, said state news agency Telam late Monday.

Argentina must file its appeal by Monday Feb. 17, the day on which Telam said the petition would be presented.

However, the U.S. Supreme Court is closed on Feb. 17 for the Presidents Day holiday, and a deadline that falls on a federal holiday moves to the next day under court procedure.

The expected filing will be made via U.S. lawyer Paul Clement. One of the best-known lawyers in the United States and a solicitor general under President George W. Bush, he is seen as a potential candidate to fill a Supreme Court vacancy if a Republican becomes president in 2017.

When contacted by Reuters, Clement and the Argentine Economy Ministry declined to comment on the date the petition would be filed.

Telam's report on the filing to the court cited sources close to the government's Debt Restructuring Unit. The unit also declined comment on the Telam report.

The closely watched litigation has triggered concerns about a potential new debt crisis in Argentina, as well as worries that it may set a precedent for other future sovereign debt restructures.

The bondholders- called "vulture funds" by Argentine President Cristina Fernandez - refused to participate in two debt restructurings spinning out of the country's $100 billion 2002 default.

Most creditors agreed to participate in debt swaps in 2005 and 2010 which gave them 25 to 29 cents on the dollar.

But, led by the hedge funds NML Capital Ltd, which is a unit of Paul Singer's Elliott Management Corp, and Aurelius Capital Management, the holdout bondholders are demanding payment in full.

In November 2012, U.S. District Judge Thomas Griesa issued an order requiring Argentina to pay $1.33 billion into a court-controlled escrow account favoring the holdout creditors.

Fernandez has said her government will continue to pay the restructured debt, but will never pay more to the holdouts.

That could result in U.S. courts enforcing injunctions blocking payment overseas to those bondholders who participated in the prior restructurings, possibly causing a new default.


The 2nd U.S. Circuit Court of Appeals in New York denied a petition by Argentina for rehearing in November 2013, setting the stage for Argentina to take its appeal to the U.S. top court.

The Supreme Court likely will not decide whether to hear the case until later in the year. If the justices do agree to hear the case, they are unlikely to hear oral arguments and issue a ruling until the court's new term begins in October 2014.

The U.S. Supreme Court previously declined to hear an earlier appeal by Argentina in October, considered premature by analysts as lower court appeals were still unresolved.

The Argentine government is in desperate need of good news - and dollars. South America's third-largest economy is facing its second major economic crisis in little more than a decade. Reserves are falling, the currency is volatile and inflation is rising fast.

So Buenos Aires is eager to regain access to the international capital markets from which it has been shut out since the 2002 default.

In recent months, the Fernandez government's hardline anti-market stance has softened, with signs of flexibility in dealing with the International Monetary Fund.

It is also negotiating the repayment of $9.5 billion it owes the Paris Club of creditor nations.

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Comments (2)
GermanHoldout wrote:
In the “Pari Passu” issue the Holdouts are 100% right! It would be helpful, if Argentina did not file a Supreme Court appeal in February against the ‘pari passu’ judgment, but if, the US Supreme Court promptly rejected it.

Argentina should rather sit down and negotiate an acceptabble solution with the Holdouts, NOW!

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!

We, the holdouts, have been suffering for more than a decade!

Beyond the U.S. Hedge Funds there are still tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

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

A reconciliation with the holdouts would improve Argentina’s ratings, initiate a firework of investments and also cheaper credits for argentine companies.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade!

If Argentina and the holdouts made NOW A AGREEMENT, seizure risks and a technical Default would be immediately averted and Argentina could immediately return to the capital market.

Holdouts want a simple, clear, secure and an ACCEPTABLE solution.

Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc.,and with maturities in the eternity. Such “shares like” financial constructs are inacceptable.

A swap from the defaulted old bonds to new bonds is unacceptable also for tax reasons. In Germany, for example, if you accepted a swap, then you would have to pay for the new bonds 30% extra tax…

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds.(Without swapping from old to new bonds, also because of tax reason)

- at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

- for the accrued interest between 2002-2015´Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Feb 11, 2014 9:28am EST  --  Report as abuse
GermanHoldout wrote:
citation: “So Buenos Aires is eager to regain access to the international capital markets from which it has been shut out since the 2002 default.”

A reconciliation with the holdouts would improve Argentina’s ratings, initiate a firework of investments and also cheaper credits for argentine companies.

If Argentina and the holdouts made now an agreement, seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.

Feb 12, 2014 1:16pm EST  --  Report as abuse
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