Argentina's last stand in battle against bondholders

A US judge ruled that Argentina must pay all bond holders from its decade-old debt restructuring, including 'vulture funds' that refused to accept previous restructured deals.

Marcos Brindicci/REUTERS
Argentine Economy Minister Hernan Lorenzino speaks during a news conference in Buenos Aires, November 22, 2012.

• A version of this post ran on the author's blog, bloggingsbyboz.com. The views expressed are the author's own.

US District Court Judge Thomas Griesa announced a big ruling on Argentina's debt [Nov. 21], one that could place the country in technical default by mid-December. (FT, Reuters, Clarin)
 
The judge ruled that Argentina must make payments to all bond holders, including those "vulture funds" that refused to accept previous restructuring deals. Previously, Argentina had only paid those funds that restructured their debt. Two interesting points out of the ruling:

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1) The judge said he would not grant a stay because Argentine President Kirchner has made public statements (different from Argentina's official legal position) that the country would never comply with a US judicial order to pay the holdout bondholders. Making the judge angry by announcing the country's defiance ahead of time may backfire on Kirchner.
 
2) The judge said US third parties working with Argentina must comply with the ruling, placing BNY Mellon and several other institutions in a very tough spot. If Argentina tries to make its 15 December payments on just the restructured debt, it will amount to a technical default and/or the US third parties will find themselves legally liable for not complying with the judicial ruling.

– James Bosworth is a freelance writer and consultant who runs Bloggings by Boz.

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