By Lawrence Hurley and Kevin Gray
WASHINGTON/BUENOS AIRES Feb 18 Argentina filed
an appeal to the U.S. Supreme Court on Tuesday seeking to
reverse lower court decisions ordering the country to pay $1.33
billion to hedge fund creditors in a case Argentine officials
warn could force it to default on its sovereign debt.
The appeal followed a Nov. 18 decision by the 2nd U.S.
Circuit Court of Appeals in New York denying Argentina's
petition for a rehearing in a decade-long legal battle with
bondholders who refused to accept the country's two
debt-restructuring offers after the country defaulted on $100
billion in 2002.
The litigation has heightened investor concerns about a
potential debt crisis in South America's second-largest economy,
which is reeling from a 17 percent currency devaluation last
month that sent shudders through global markets.
The Argentine government said through its embassy in
Washington the lower court orders "threaten the well-being of
Argentina and its citizens, as well as of the countless holders
of performing Argentine debt, many of whom are U.S.
institutional investors and individuals."
Argentina is seeking to reverse the rulings that say the
country must make full payment to the "holdout" creditors led by
hedge funds Aurelius Capital Management and NML Capital Ltd, a
unit of billionaire Paul Singer's Elliott Management Corp.
Argentina argues the funds bought the debt at a deep
discount after the default and sought to thwart the country's
efforts to restructure its debt in which it paid its creditors
less than full value of the bonds.
Creditors holding about 93 percent of Argentina's bonds
agreed to participate in the two debt swaps in 2005 and 2010,
accepting between 25 and 29 cents on the dollar.
The case is being closely watched because of its potential
impact on future sovereign debt restructurings.
"Argentina's arguments for prolonging this dispute are
without merit and entirely unnecessary," Jay Newman, a senior
portfolio manager at Elliott, said in a statement. "As we have
stated many times, if Argentina were willing to talk to its
creditors, this dispute could be resolved quickly."
In their rulings, the lower courts said Argentina must pay
the bondholders who refused to participate in the debt
restructuring along with those who did.
Lawyers for Argentina argue the rulings violate sovereign
immunity granted under U.S. federal law by dictating to a
country who they should make payments to.
Argentine President Cristina Fernandez has said her
government will continue to pay creditors holding the country's
restructured debt, but will never pay the holdout bondholders
whom she has called "vultures."
Argentina's continued refusal to pay could result in U.S.
courts enforcing injunctions blocking payment overseas to
bondholders who participated in prior restructurings, possibly
causing a new default.
In its appeal to the Supreme Court, Argentina suggested the
high court ask the New York Court of Appeals to weigh in on a
question of how to interpret state law, based on the fact that
the bonds were issued under New York law.
If the Supreme Court were to seek the New York court's
opinion, that additional legal procedure would delay the
justices' consideration of whether to take the case.
If the justices agree to hear the case, a decision could
come between October, when the next Supreme Court term begins,
and June 2015, the end of the term.
In November 2012, U.S. District Judge Thomas Griesa ordered
Argentina to pay the $1.33 billion into a court-controlled
A three-judge panel of the 2nd Circuit upheld Griesa's order
in August, but put it on hold pending an appeal to the Supreme
Court. If the high court declines to hear the case, the appeals
court ruling would be left intact.