Argentina Urges Appeals Court to Let It Pay Restructured Debt

  • U.S. judge revoked injunctions barring country's bond payments
  • Holdout hedge funds fear loss of leverage if bans are lifted

Argentina urged a U.S. appeals court to uphold an order allowing it to pay its outstanding restructured debt and issue new bonds after a group of investors challenged the decision following an historic $4.65 billion settlement.

The South American country’s filing Monday in federal appeals court in Manhattan was made in response to an appeal by investors holding defaulted Argentine bonds -- including four hedge funds that reached the settlement in February -- seeking to stop the debt payments. Argentina said the lower court’s ruling is critical to moving forward on the deal.

“As the court found, now that the republic has returned to the bargaining table to negotiate in good faith with the plaintiffs, the injunctions are not only unnecessary but affirmatively counterproductive and inequitable,” Argentina’s lawyers said in the filing. “The continued force of the injunctions precludes Argentina from accessing the global capital markets to raise funds needed to complete the settlements.”

On March 14, Paul Singer’s Elliott Management, Aurelius Capital Management, Bracebridge Capital and Davidson Kempner argued that U.S. District Judge Thomas Griesa in Manhattan was too quick to drop injunctions blocking Argentina from the debt market and made legal errors in doing so.

Legislation Needed

Griesa’s order and the settlements both depend on Argentina’s passing legislation allowing the agreements and paying off all the bondholders that settled their claims by Feb. 29. Elliott and the other three lead hedge funds also negotiated provisions allowing them to back out of their deals if Argentina doesn’t pay them by April 14. They’re worried that if they’re not paid, Griesa’s ruling lifting the injunctions will leave them without any leverage.

Argentina says the investors’ appeal presents an obstacle to resolving the litigation because lawmakers’ approval of the settlement is contingent on the lifting of the injunctions. The appeals court, which agreed to hear the case on an expedited basis, hasn’t set a date for arguments before a three-judge panel.

Argentina’s Congress is considering the legislation along with a proposal to raise $11.7 billion in new bonds to fund the bondholder settlements.

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