Argentine Bond Swap Plan Violates U.S. Orders, Judge Says

The Argentine Economy Minister’s plan to exchange securities subject to New York laws into local debt would violate a U.S. court order, a judge said.

U.S. District Judge Thomas Griesa’s ruling today in Manhattan federal court follows the U.S. Supreme Court’s refusal to consider Argentina’s appeal of his decisions requiring the country to pay holders of defaulted bonds when it pays the holders of its restructured debt.

Argentina’s Economy Minister Axel Kicillof said the country would try to skirt Griesa’s ruling by moving its international bonds into the local market.

Officials overseeing South America’s second-biggest economy said the nation doesn’t have enough reserves to pay an estimated $15 billion of claims from holders of defaulted bonds that didn’t take part in two debt exchanges after the country’s 2001 default. Holdouts that include billionaire hedge-fund manager Paul Singer’s NML Capital refused a 2010 offer of about 30 cents on the dollar, demanding full payment.

Argentine officials plan to come to New York next week in a bid to start talks with bond holders demanding full payment, Carmine Boccuzzi, a lawyer for Argentina, said at the hearing.

“If they want to talk about settlement, they know how to find us,” Robert Cohen, a lawyer representing Elliott Management Corp.’s NML Capital, told Griesa. A group led by NML is owed more than $1.5 billion, according to lawyers at the hearing.

In Force

Griesa ordered Argentina to pay the holdout bondholders if it seeks to pay its restructured debt. His rulings remained in force as the U.S. Supreme Court this week refused to hear Argentina’s appeal.

“Negotiation is fine,” Griesa said. “As a judge, what I want is a legal mechanism to prevent another situation where the republic can simply laugh off another judgment.”

Argentine President Cristina Fernandez de Kirchner said this week that complying with the ruling was impossible.

“The president’s speech is a problem,” Griesa said. It “really does not give me confidence in a good-faith commitment to pay all the obligations of the republic.”

The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).

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