By Nate Raymond and Daniel Bases
NEW YORK Nov 18 A U.S. appeals court on Monday
declined to reconsider an order requiring Argentina to pay $1.33
billion, ruling in favor of bondholders who refused to
participate in two debt restructurings spinning out of the
country's 2002 default.
The 2nd U.S. Circuit Court of Appeals in New York denied a
petition by Argentina for rehearing by all of the judges sitting
on the court.
The court's decision sets the stage for Argentina to go to
the U.S. Supreme Court in a case that has created concerns about
a potential new debt crisis following Argentina's $100 billion
default more than a decade ago.
The decision on Argentina's request for a so-called en banc
hearing is a victory for bondholders led by the hedge funds NML
Capital Ltd, which is a unit of Paul Singer's Elliott Management
Corp, and Aurelius Capital Management.
"The Supreme Court previously rejected Argentina's appeal
and today's unanimous decision of the 2nd Circuit only
reinforces that Argentina's self-serving pleas do not warrant
the Supreme Court's attention," said Theodore Olson, a lawyer
Argentina has refused to pay the holdout bondholders, who
Argentine President Cristina Fernandez has called "vulture
Fernandez, the 60-year old Peronist leader, resumed her
presidential duties on Monday and appeared on television for the
first time since undergoing brain surgery five weeks ago.
Argentina's continued refusal to pay up could result in U.S.
courts enforcing injunctions blocking payment overseas to
bondholders who participated in prior restructurings in 2005 and
2010, possibly causing a new default.
In an attempt to avoid such a default, these bondholders who
participated in one or both of the exchanges said on Monday they
were organizing an effort to propose a solution and end the
"In an attempt to create a solution for a decade-old
standoff, exchange bondholders have held several meetings over
the last couple of weeks and are forming an ad hoc group and a
steering committee to formalize a proposal for a global
resolution, end litigation and avoid a default by Argentina,"
Robert Koenigsberger, managing partner and chief investment
officer of Gramercy Funds Management said in an e-mailed
The U.S. Supreme Court previously declined to hear an
earlier appeal by Argentina in October. The top U.S. court
likely would not decide whether to hear any new appeal by
Argentina until sometime in 2014.
Government spokespeople contacted in Buenos Aires had no
immediate comment on the ruling.
"We welcome the idea of good faith negotiations with
Argentina, but we don't see the point of negotiating with other
bondholders," an NML spokesman told Reuters.
The case is one of a multitude of lawsuits filed by
creditors of Latin America's third largest economy following its
historic 2002 sovereign debt default.
Creditors holding about 93 percent of the country's bonds
agreed to participate in the two previous debt swaps in 2005 and
2010 which gave them 25 to 29 cents on the dollar.
Other bondholders including NML and Aurelius went to court
seeking payment in full. The litigation was filed in New York
under the bond documents' terms.
NML has said it approached Argentina "countless" times to
come to a solution but has always been rebuffed.
In 2011, U.S. District Judge Thomas Griesa found Argentina
breached a clause in the bond documents that required the equal
treatment of creditors.
The 2nd Circuit upheld that decision in October 2012 but
sent the case back to Griesa to decide how the injunctions he
had issued would work.
In November 2012, Griesa issued a subsequent order requiring
Argentina to pay the $1.33 billion into a court-controlled
escrow account favoring the holdout creditors.
A three-judge panel of the 2nd Circuit upheld Griesa's order
in August, but put the effects of the order on hold pending a
timely appeal to the Supreme Court.
The 2nd Circuit on Nov. 1 refused to lift the stay, a
request the holdout bondholders made after Fernandez proposed a
voluntary swap of foreign debt in exchange for bonds governed by
The case is NML Capital Ltd et al v. Republic of Argentina,
2nd U.S. Circuit Court of Appeals, No. 12-105.