| BUENOS AIRES
BUENOS AIRES Aug 13 Argentina came out swinging
on Wednesday against the U.S. judge overseeing its debt default
case, in defiance of a threatened contempt order, and
disappointed market hopes it might soon restart talks with the
hedge funds suing the country.
A group of holdout investors have sued the South American
country for full repayment on bonds that went into default in
2002. The funds rejected debt restructurings in 2005 and 2010,
holding out for better terms.
U.S. Judge Thomas Griesa, overseeing Argentina's
long-running battle with the funds, said in New York on Friday
that he would issue a contempt order unless the government
stopped claiming it had met its obligations and was not in
Far from backing off of those assertions, Cabinet Chief
Jorge Capitanich said Griesa had been paralyzed by his own lack
of understanding of the case and that no new talks had been
scheduled with the hedge funds.
"The proper conditions do not exist to negotiate,"
Holders of restructured bonds have asked Griesa to release
money that Argentina had deposited in June, intended as a coupon
payment. Capitanich criticized the judge for not acting on those
"His lack of decision clearly comes from not understanding
the process, not understanding Argentina's status as a sovereign
country, not understanding that his actions violate sovereign
immunity, which transcends judicial concerns and enters the
realm of international relations, which are managed by the
executive branch of the U.S. government," Capitanich said.
In 2012, Griesa ruled that Argentina could not repay holders
of restructured debt without also paying hedge funds their court
award of $1.33 billion plus interest at the same time.
Argentina says it met its obligation to the holders of
restructured bonds when it deposited $539 million into the
account of intermediary Bank of New York Mellon in June. Griesa
called the deposit illegal and ordered the money frozen.
As a result, Argentina effectively missed the coupon payment
after a grace period ended on July 30, pushing it into default
on its restructured debt.
With no negotiations scheduled, the case was in limbo while
international banks struggled to reach a deal to buy some of the
Argentine debt held by the hedge funds led by Elliott Management
Corp and Aurelius Capital Ltd.
"The judge cannot issue an order of contempt because he
cannot enforce it against a sovereign country," Capitanich said.
"He cannot embargo the funds because they do not belong to
Argentina, but to the (restructured) bondholders. The judge
cannot make any decision because he knows he would be
effectively violating contracts," he added.
"The only thing he is doing, at the express instruction of
the vultures, is to block the payment process after Argentina
met its obligations," Capitanich said.
Argentina has long accused the judge of overstepping his
bounds and being partial toward the funds, which bought
Argentine bonds at steep discounts and are characterized by
President Cristina Fernandez as "vultures" out to wreck her
country's finances in their pursuit of huge profits.
The case could get a lot messier should holders of
Argentina's newly defaulted debt decide to declare principal and
interest immediately due. The move, known as acceleration, could
complicate efforts to put the country's debt woes to rest.
An acceleration on the restructured bonds would also deal a
blow to the hedge funds in the case, who could suddenly have to
share their claim with a much larger pool of investors.
The International Swaps and Derivatives Association (ISDA)
Determinations Committee had a conference call scheduled for
Wednesday to discuss the next step in settling the prices on
what investors will receive for credit default swap contracts on
Argentine debt, a side issue to the main dispute.
(Additional reporting by Davide Scigliuzzo of Thomson Reuters
IFR in New York and Daniel Bases; Editing by Jonathan Oatis)