December 5, 2012 / 12:10 AM / 5 years ago

UPDATE 3-Argentina gets second reprieve from U.S. court on debt payment

* Holdout bondholders denied request for $250 mln security
    * Appeals court ruling clears hurdle for exchange bondholder

    By Daniel Bases
    NEW YORK, Dec 4 (Reuters) - A U.S. appeals court on Tuesday
refused to order Argentina to post a security deposit as the
country seeks to overturn a court ruling that it pay investors
$1.33 billion on defaulted bonds.
    So-called holdout investors have tried to force Argentina to
deposit $250 million while the country appeals last month's
order by a U.S. judge that it pay the creditors the full value
of the bonds left over from a massive 2002 default. 
    Argentina won a reprieve last Wednesday when the U.S. Second
Circuit Court of Appeals in New York said Argentina need not
deposit the $1.33 billion into the escrow account by Dec. 15 to
satisfy the holdout creditors' claims. 
    Holdouts then filed a motion seeking a security deposit be
made to show Argentina was acting in good faith with the court.
    "Appellees request that this Court amend its November 28, 
2012 stay order by requiring the Republic of Argentina to post
security on or before December 10, 2012. It is hereby ordered
that the motion is denied," the appeals court said in its
    The appeals court has scheduled oral arguments in the case
for Feb. 27, 2013.   
    The holdouts, including Elliott Management's NML Capital Ltd
and the Aurelius Capital Management funds, want full repayment
on their defaulted Argentine bonds after spurning debt exchanges
in 2005 and 2010 that 93 percent of bondholders accepted.
     A spokesman for Elliott declined to comment on the latest
ruling from the appeals court.
    Prices for Argentina's dollar-denominated bonds issued
during the debt swaps rose between 1.5 percent and 3.9 percent
on Tuesday in local over-the-counter trade. Bond prices jumped
across the board after the appeals court ruling was reported.
    The cost to protect a $10 million portfolio of Argentine
sovereign debt annually for five years fell to $1.7 million per
year after the ruling from $1.9 million on Monday, according to
data provider Markit.  
    Barring another attempt by holdout investors to win an order
requiring a payment, Argentina looks to be in the clear to
continue servicing its restructured debt without fear of court
    Argentine Economy Minister Hernan Lorenzino welcomed the
    "It's a positive ruling," he told reporters in Buenos Aires.
"It's (also) positive that the participation of interested
third-parties -- not only (exchange) bondholders but also the
payment intermediaries -- has been ratified."
    Argentina has called the holdout creditors "vultures" and
vowed never to pay them.
    The latest battle stemming from Argentina's $100 billion
sovereign default nearly 11 years ago centers on a 2nd Circuit
decision in October that the country violated a bond provision
requiring it treat all creditors equally when it paid the
exchange bondholders without paying the holdouts.
    Dec. 15 is a critical day because Argentina is scheduled to
pay $3 billion on warrants issued as part of the debt swaps.
    This had raised fears of another default because if
Argentina had refused to pay the holdouts, as was expected, U.S.
courts could have disrupted payments to holders of restructured
bonds handled by intermediaries such as banks and clearing
    Argentina next owes money on its restructured debt in March
    The case is NML Capital Ltd et al v. Argentina, 2nd U.S.
Circuit Court of Appeals, No. 12-105.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below