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UPDATE 1-Argentina asks U.S. Supreme Court to hear bonds case
February 18, 2014 / 10:52 PM / in 4 years

UPDATE 1-Argentina asks U.S. Supreme Court to hear bonds case

By Lawrence Hurley

WASHINGTON, Feb 18 (Reuters) - Argentina on Tuesday filed a petition asking the U.S. Supreme Court to review a court order requiring it to pay $1.33 billion to bondholders who refused to take part in two debt restructurings from the country’s 2002 default.

The petition, which had been expected, followed a decision by the 2nd U.S. Circuit Court of Appeals in New York on Nov. 18 to deny Argentina’s petition for a rehearing.

The litigation has created concerns about a potential debt crisis after Argentina’s peso had a sharp 17-percent devaluation in January, which sent a shudder through global markets. The country defaulted on $100 billion more than a decade ago.

The Argentine government said through its embassy in Washington that the 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.”

In its appeal to the Supreme Court, Argentina suggested that 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 on the top U.S. court agree to hear the case, a decision could come between October, when the next term begins, and June 2015, the end of the term.

Creditors holding about 93 percent of Argentina’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 hedge funds NML Capital Ltd and Aurelius Capital Management, went to court seeking payment in full.

NML is a unit of Paul Singer’s Elliott Management Corp.

“Argentina’s arguments for prolonging this dispute are without merit and entirely unnecessary. As we have stated many times, if Argentina were willing to talk to its creditors, this dispute could be resolved quickly,” Jay Newman, a senior portfolio manager at Elliott, said in a statement.

Argentina has refused to pay the bondholders, whom President Cristina Fernandez has called “vulture funds.”

In November 2012, U.S. District Judge Thomas Griesa ordered Argentina to pay the $1.33 billion into a court-controlled escrow account.

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.

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