Argentina asks US court to block holdout debt payouts

Judge Thomas Griesa

In a writ filed late on Friday, Argentina said it is willing to resolve the litigation with holdouts by reopening a debt restructuring offer, a move that would require legislative permission but that would likely be rejected by plaintiffs.

“The executive is prepared to once again submit to Congress a proposal that definitively treats all holdout creditors on the same terms as participants in the Republic’s 2010 exchange offer,” the filing says.

But Argentina urged a US appeals court to reverse an order requiring the country to pay US$1.33 billion to creditors who did not participate in its two debt restructurings, a legal case that could have huge ramifications for global debt markets.

Lawyers for Argentina’s government said that a trial judge was “wrong to ignore the chorus of voices” who opposed his November order on payments to so-called “holdout” creditors.

Those payments, to a court-controlled escrow account, would threaten the service of US$24 billion in restructured debt, Argentina’s lawyers wrote in papers filed in the Second US Circuit Court of Appeals in New York.

“There is no authority permitting a US court to order a sovereign to bring its immune assets into the United States in order to ‘turn over’ or distribute them to its creditors,” lawyers for the Argentine government said in the 69-page filing.

The appeals court is expected to decide next year whether to force Argentina to pay the US$1.33 billion to investors in the defaulted debt. The decision could have broad impact on the ability of governments to raise money by selling bonds and on strained countries’ response to economic crises.

The case stems from Argentina’s US$100 billion sovereign debt default 11 years ago. Argentina is trying to avoid paying the holdout creditors, who refused to take part in massive debt restructurings in 2005 and 2010.

About 92 percent of the bonds were restructured, giving holders between 25 cents and 29 cents on the dollar.

But the holdouts, led by Elliot Management Corp affiliate NML Capital Ltd and the Aurelius Capital Management funds, demanded to be paid in full. Argentina calls the holdouts “vultures” and has resisted.

“The Republic has already made two debt restructuring offers that plaintiffs chose to reject. It cannot present a proposal that treats holdout creditors better than exchange bondholders.”

http://www.buenosairesherald.com/article/120525/argentina-asks-us-court-to-block-holdout-debt-payouts