March 6, 2012 / 5:21 AM / 6 years ago

Argentine minister blasts U.S. judge's order on defaulted debt

BUENOS AIRES, March 5 (Reuters) - Argentina’s Economy Minister on Monday lambasted a U.S. judge who ordered the country to pay interest to a holdout creditor on debt it defaulted on a decade ago, saying the judge had changed tack and succumbed to pressure from so-called “vulture funds”.

NML Capital Ltd and other holdout creditors who rejected debt swaps in 2005 and 2010 are suing to recover the full value of their non-performing bonds after Argentina defaulted on some $100 billion in sovereign debt in 2002.

Argentina has yet to return to international capital markets but should it try to do so, it faces the threat that some of its assets could be seized as holdouts try to enforce multibillion-dollar court judgments against the country.

Argentine daily La Nacion reported on Monday that U.S. District Judge Thomas Griesa, who oversees U.S. litigation over the sovereign default, had ruled on Feb. 23 that Argentina must also pay NML any time it services its restructured bonds.

NML, an affiliate of the investment firm Elliott Management Corp, is seeking $650 million in capital and interest from Argentina, La Nacion said, adding that Griesa’s ruling affects “all parties involved directly or indirectly” including banks.

NML based its legal argument on the “pari passu” clause, under which securities issued have rights and privileges that are the same as those of existing securities of the same class, the paper said.

“The ruling has very little reasoning,” Economy Minister Hernan Lorenzino told reporters late on Monday, saying that the judge had ruled differently in December.

“It’s evident that he succumbed to the pressure of the vulture funds.”

Lorenzino rejected the notion that the ruling would put in peril the 2005 and 2010 debt swap agreements which cover 92 percent of debt that Argentina stopped servicing and resulted in steep losses for those bond holders.

“(It) will not alter the payment of bonds that came from the 2005 and 2010 restructurings because this is subordinated by the ruling of an appeals chamber and we already have reached out to them,” he said.

Griesa has granted several billion dollars in court judgments to litigating holdout creditors. But so far, they have not been able to collect any money since U.S. sovereign immunity laws protect most assets owned by a country abroad.

Argentina has argued that bondholders who did not take part in the 2005 and 2010 debt swaps do not deserve full recovery because it is unfair to bondholders who accepted less.

So-called vulture funds have vowed to try to block any new debt operations by Argentina. In past months they have taken new action in a New York court.

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