Argentina on Friday repaid the so-called “vulture funds” that sued it over billions of dollars in defaulted bonds, ending a 15-year saga and restoring its good standing on international credit markets.
The payment ends a decade-long battle in the US federal courts and should enable the South American nation to finally lay to rest the ghost of its 2001 default, the largest in history at the time — nearly US$100 billion.
“The republic has made full payment in accordance with the specific terms of each such agreement” with holdout creditors who had successfully sued the country, Argentina’s lawyer said in a statement to the court.
US District Judge Thomas Griesa then gave his official blessing, lifting an injunction he had slapped on the country that effectively blocked its deals to restructure its debt until it settled with the holdouts.
Argentina handed over US$6.2 billion to settle disputes with 20 creditors. It is due to pay another US$3.1 billion in the coming days to settle lingering claims.
The move comes after Buenos Aires raised US$16.5 billion in a momentous return to international credit markets, with most of the proceeds going toward repaying the holdouts.
“The payments made today to the funds in litigation totaled US$9.3 billion. The total of all payments is estimated to reach US$10.5 billion, accounting for 44 percent of all legal claims,” the Argentine Ministry of Finance said in a statement.
Griesa’s decision also “allows payments owed to bondholders from the 2005 and 2010 debt swaps, and this will be implemented within the next three weeks,” the statement said.
Paying off disgruntled creditors — especially New York hedge funds NML Capital, a unit of multi-billionaire Paul Singer’s Elliott Management and Aurelius Capital Management, which led the lawsuits against the country — will draw the curtain on a long drama that had hurt the Argentine economy.
The payments concluded a delicate legal and financial dance that required creditors to trust that they would be paid by Argentine President Mauricio Macri’s administration, according to settlements negotiated in February.
The creditors were mistrustful as former Argentine president Cristina Kirchner had for years refused to deal with them.
The conflict dates back to Argentina’s devastating 2001 economic crisis, when the collapse of its dollarized economic model forced the country to default on its debt.
Nearly all its creditors eventually agreed to take losses of up to 70 percent on their bonds in a restructuring that was meant to allow the country to get back on its feet.
However, 7 percent of the creditors, the so-called holdouts, refused. NML and Aurelius, which have pioneered the business of buying up cheap defaulted sovereign bonds and suing for full payment, led the campaign to take the country to court.
Griesa ruled in the hedge funds’ favor in 2012. Kirchner appealed the case all the way to the US Supreme Court, but never managed to overturn the New York judge’s ruling.
Even so, Kirchner refused to pay, arguing it was unfair to the majority of creditors and labeling the hedge funds “vultures.”
However, with Argentina stuck in a prolonged economic slowdown, Macri, a business-friendly conservative, pulled off a come-from-behind election win in November last year.
He took office vowing to get the economy back on track, notably by settling the bitter debt dispute.
US Treasury Secretary Jacob Lew heaped praise on Macri after the debt payment, which he called “a testament to the sea change in policy” and “the product of Argentina’s new direction.”
“Argentina is turning a page on a difficult period of its history,” he said in a statement. “I have reiterated our admiration for the speed at which Argentina is moving to create more sustainable and inclusive economic growth, and to reconnect with the global economy and the world community.”
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