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Argentina Bond Clash Extended as Court Seeks Fund Plan

Holders of defaulted Argentina debt, led by billionaire Paul Singer’s Elliott Management Corp., were directed by a court to respond to the South American nation’s proposal to force them to take a sharp discount on their bonds.

The U.S. Court of Appeals in New York yesterday ordered Elliot unit NML Capital Ltd. to respond to Argentina’s payment proposal by April 22. The creditors, who hold bonds that Argentina repudiated in its record $95 billion default in 2001, are seeking $1.4 billion. The order means the court is unlikely to rule before then.

Argentina is appealing a ruling by U.S. District Judge Thomas Griesa in Manhattan that it must pay the full amount owed to the holders of its defaulted bonds whenever it services the restructured debt. On March 29, responding to an order by the court, Argentina filed a proposal similar to ones the bondholders had rejected in earlier debt restructurings.

Argentina proposed forcing NML and the other creditors to take new bonds worth about one-sixth what Griesa said they’re owed. The country’s restructured debt fell yesterday on concern Argentina will default on bonds issued in its 2005 and 2010 restructurings rather than paying NML and other holdout creditors if the court orders it do so.

Argentina claimed a decision forcing it to pay the defaulted bondholders immediately would expose it to $43 billion in additional claims it can’t pay and trigger a new default.

The nation’s officials have said they may ignore the U.S. court altogether.

The lower court case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan). The appeal is NML Capital Ltd. v. Republic of Argentina, 12-00105, U.S. Court of Appeals for the Second Circuit (New York).

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