Argentina Lawyer Says U.S. Ruling Threatens Bond Markets

An American court ruling centering on Argentina’s defaulted bonds poses a “dire threat” to sovereign debt markets, said Paul Clement, the lawyer asking the U.S. Supreme Court to take up the case.

Speaking publicly on the case for the first time since he filed Argentina’s appeal to the Supreme Court last week, Clement said the lower court decision would imperil countries’ ability to restructure their debts.

The New York-based federal appeals court said Argentina must pay owners of the repudiated bonds in full before the country can make payments on a separate $24 billion in restructured debt.

The ruling “radically changes the balance of power between those that hold out and those that accept voluntary restructurings,” Clement, formerly the top Supreme Court lawyer for the U.S. government, told reporters at the Argentine embassy in Washington.

The dispute stems from Argentina’s 2001 default on a record $95 billion in debt. The country offered to substitute bonds worth 25 cents to 29 cents on the dollar in 2005 and made a similar proposal in 2010. Owners tendered about 92 percent of the outstanding debt.

Argentina is battling claims by a fund, controlled by billionaire Paul Singer, that holds some of the defaulted debt and sued to collect the full amount.

Outside the embassy, the American Task Force Argentina, which represents some of the holdouts, distributed flyers that called Clement a “defender of Argentina’s disgraceful behavior toward U.S. courts.”

Argentine President

Argentine President Cristina Fernandez de Kirchner has said the country will never pay the funds, and the country’s lawyers have said in court that it won’t obey the rulings.

The legal fight is putting U.S. courts in the unusual position of shaping another country’s financial future. Argentina says the dispute threatens to force a new default, and lower court rulings have led Standard & Poor’s, Fitch and Moody’s to lower the country’s bond ratings. The bondholders say the country is exaggerating the potential impact.

Under the Supreme Court’s normal scheduling practices, the justices may say as soon as April whether they will consider the appeal. They would hear arguments and rule during the nine-month term that starts in October.

The Supreme Court case is Argentina v. NML Capital, 13-990.

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