Mexico to Back Argentina in Supreme Court Debt Case Appeal

Mexico will support Argentina’s bid for U.S. Supreme Court review of an appellate ruling that the owners of repudiated bonds must be paid in full when the South American country makes payments on its restructured debt, Finance Minister Luis Videgaray said.

The Aug. 23 ruling by a federal appeals court in New York could threaten future sovereign debt restructurings, Videgaray said in an interview at Bloomberg’s Economic Summit in Mexico City. The Supreme Court has been notified of Mexico’s intent to submit a friend-of-the-court brief, due March 24, he said.

“We believe there’s a real risk that a Supreme Court decision against Argentina’s interests could create a precedent that would make future sovereign restructurings much more difficult and costly,” Videgaray said.

Argentina filed a petition on Feb. 18 asking the Supreme Court to take the case, saying the order blocking payments on restructured bonds until the untendered debt is paid threatens to force a new default. It also argues that the appeals court didn’t properly apply the Foreign Sovereign Immunities Act, which limits suits against foreign governments.

Under the Supreme Court’s normal scheduling practices, it won’t act on the appeal until at least the end of May. They would hear arguments and rule during the nine-month term that starts in October.

Argentina defaulted on $95 billion of bonds in 2001. While about 93 percent of creditors accepted losses of 70 cents on the dollar in the country’s 2005 and 2010 debt restructurings, holdout investors including hedge fund Elliott Management Corp. sued for full repayment and won.

The extra yield investors demand to own Argentine government bonds instead of U.S. Treasuries narrowed 0.13 percentage point to 8.61 percentage points today, according to data compiled by JPMorgan Chase & Co.

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