- Funds say 86 percent of defaulted bond claims are unresolved
- Argentina reached settlement with Montreux Partners, EM Ltd.
A group of hedge funds fighting to stop Argentina from paying other debt holders before them isn’t backing down.
The hedge funds Thursday urged a U.S. judge to keep in place injunctions blocking Argentina from paying its restructured debt before the country pays them what they’re owed on defaulted bonds.
Dropping the injunctions “would upend the negotiations that only now are just beginning in earnest and would risk new and unwanted litigation," funds led by Paul Singer’s NML Capital argued in a court filing in Manhattan.
Argentina told the judge last week that a court-ordered ban is no longer needed after it reached agreements this month to resolve claims on defaulted bonds with billionaire Kenneth Dart’s EM Ltd. and Montreux Partners. The funds say the injunctions are necessary to keep Argentina’s new president, Mauricio Macri, at the bargaining table. They dispute Argentina’s claim that settlement talks have made substantial progress.
“For 86 percent of plaintiffs, their claims remain unsettled and a meaningful settlement dialogue has yet to develop,” the funds said.
The group also complained that Argentina hadn’t spent much time meeting with the bondholders before going public with a settlement offer they called an "ultimatum." They said the settlement this month included payment of 100 percent of one hedge fund’s claim, much better terms than those offered to the rest of the holdouts.
Argentina’s action is already "impeding communication and distracting parties from focusing on bridging their relatively few differences,” the funds said in their filing.
Daniel Pollack, the special master appointed by the court to lead negotiations, agreed Wednesday to schedule a face-to-face meeting between the hedge funds and representatives of Argentina on Thursday only after repeated requests by the funds, they claimed.
"None of this is to say that the efforts of Argentina’s new government to resolve these long-pending cases are unwelcome," the funds said. "Quite to the contrary, plaintiffs are encouraged by the engagement of Argentina’s new leadership and by its stated desire to reach agreements to resolve these cases."
Argentina defaulted on $95 billion in sovereign debt in 2001. It restructured most of that debt by offering new bonds, at a steep discount, in exchange for the defaulted bonds. U.S. District Judge Thomas Griesa, who is overseeing U.S. litigation over Argentina’s default, ruled in 2012 that the contracts underlying the defaulted bonds called for Argentina to treat their holders equally with holders of the later debt.
He issued injunctions blocking Argentina from paying the restructured bonds and vowed not to pay on the defaulted bonds, most of which were bought up by hedge funds.
After Griesa’s injunctions were upheld on appeal, Argentina defaulted a second time, on the restructured debt in 2014, because the nation’s former president, Cristina Fernandez de Kirchner, refused to pay the holdouts. Macri’s government has said it wants to negotiate a resolution to the 15-year standoff that has blocked Argentina’s access to international credit markets.
“We’re talking with the mediator every day and exchanging information with the groups of creditors," Finance Minister Alfonso Prat-Gay told reporters in Brasilia Thursday. To pay the creditors in the settlement, “we need the judge to lift the injunction in order to issue bonds” for the payment, he said.
Ashley Ferrell, a spokeswoman for the New York-based law firm Cravath, Swaine & Moore LLP, which represents Argentina, declined to comment on the hedge funds’ filing.
The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).