Aurelius Gives Argentine Creditors Notice of Possible Fraud

Aurelius Capital Management, a hedge fund that sued for repayment on defaulted Argentine notes, said a $1.4 billion bond sale by the nation may constitute fraud.

In a statement to creditors and financial institutions that participated in Tuesday’s offering, Aurelius said the sale conducted under Argentine law was done with “the intent to hinder, delay or defraud” creditors pursuing payment on defaulted bonds and that they may have the right to pursue relief.

“The present notice is intended to ensure that the Notified Persons cannot be said to have taken the Bonds in good faith or without knowledge of the fraud,” the New York-based hedge fund said.

A press official for Argentina’s Economy Ministry declined to comment.

A group of investors including Aurelius and hedge fund NML Capital won a ruling in U.S. court requiring Argentina to pay holders of defaulted bonds from 2001 whenever it makes payments on securities issued in its debt restructurings. Argentina has refused to comply with the ruling, which in July triggered the nation’s second default on overseas bonds in 13 years.

The U.S. judge overseeing the dispute said earlier Wednesday that the creditor group is entitled to information from Argentina about the offering, while rejecting a request that the country and two banks that bought the bonds produce details of the sale by Thursday.

He directed the parties to try to reach agreement on getting the information to the so-called holdout creditors.

NML wants to identify Argentine assets that can be attached to pay judgments against the country stemming from its 2001 default on $95 billion in debt, the hedge fund’s lawyer, Robert Cohen, told the judge in an hour-long hearing in Manhattan.

Argentina hasn’t sold bonds abroad since the 2001 default. After the default, holders of about 92 percent of the repudiated debt agreed to take new bonds, at a discount of about 70 percent, while Aurelius, NML and other creditors fought for better terms in court.

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