Mon, Jun 08, 2015 - Page 15 News List

Ruling passes debt to future Argentine government: expert


Argentine President Cristina Fernandez, left, listens to Argentine Minister of the Economy Axel Kicillof during a meeting with state governors in Buenos Aires on Jan. 30.

Photo: Reuters

A new ruling by a US judge has increased the total that Argentina owes holdout bondholders to US$5.2 billion — a massive responsibility that, if upheld, would likely fall to the next Argentine government, experts said.

In a 26-page ruling, US federal District Court for the Southern District of New York Judge Thomas Griesa concluded on Friday that by refusing to make payment to some hedge fund and individual bondholders of its defaulted debt, while making payments to other creditors, Buenos Aires was in violation of an equal treatment provision in its contracts.

Griesa in a 2012 ruling sided with a group of hedge funds, led by NML and Aurelius Capital Management, who for years have been trying to force Argentina to pay off US$1.3 billion in bonds they hold.

The judge said that his 2012 ruling should also apply to more than 500 “me-too” bondholders who were not covered under the original decision.

Argentina has been refusing to pay the hedge funds, saying that they relinquished their claim when they refused to join a restructuring of nearly US$100 billion in debt the nation defaulted on in 2001.

“It really was just a matter of time for this to happen,” Argentine economist Nicolas Dujovne said. “It makes sense for the ruling to be the same, since what was being sought was the same.”

Under mounting pressure, the Argentine government was quick to slam the latest ruling and said it would appeal, branding Griesa’s ruling “illegal” and “unfortunate.”

Those benefiting from Friday’s ruling are about one-third of the holdouts, Dujovne said.

Analysts predicted that the legal fight could drag on for years.

“In any event, this government is not going to do anything — except wave its ‘I am against the hedge funds’ flag,” Dujovne added. “The next government will be the one to sit down and talk with the holdouts, will want to try to get Argentina on good terms with the world and will want to decrease the total of the amount being sought.”

Argentine President Cristina Fernandez was elected in 2011 for a second term and, under the constitution, cannot run for a third in elections in October this year, which means that the country’s debt mess is likely to have to be sorted out by her successor.

Last month, Argentine Minister of the Economy Axel Kicillof went to the UN to accuse so-called “vulture funds” of gaining “extortionate power” over nations seeking to restructure sovereign debt.

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