Argentina ordered to pay $1.33bn to default 'hold-outs'

Fri, Nov 23, 2012, 00:00

Argentina suffered a reversal in its battle with holders of bonds on which it defaulted in 2001 after a judge in New York ordered the country to pay them $1.33 billion (€1.03 billion) next month.

The ruling on Wednesday ordered that the bonds be redeemed when Argentina pays some $3 billion to investors who participated in debt restructuring deals in 2005 and 2010.

Argentina’s president Cristina Kirchner has ruled out sending “one dollar” to those who refused to participate in the restructuring deals, describing the hold-outs as “vulture funds”.

The hold-outs are in possession of about $8 billion of defaulted debt. They refused to accept the restructuring deals which imposed losses of more than 65 per cent on investors.

If her lawyers are unable to overturn the ruling, Mrs Kirchner faces a humiliating climbdown in paying out or defaulting on the restructured debt in order to avoid scheduled payments being seized by the hold-outs.

‘Argentina must pay’

That will push out further any hope of Argentina ending its 11-year exile from international capital markets.

In his ruling US district judge Thomas Griesa rebuked Argentina when he noted, “it is hardly an injustice to have legal rulings which, at long last, mean that Argentina must pay the debts which it owes”.

The hold-outs took legal action in New York as this is where the original bonds were issued. The ruling comes just days after Argentina’s first general strike in a decade, which brought much of the South American country to a standstill.

Tuesday’s strike was called by a former Kirchner ally, Hugo Moyano, who has since fallen from grace, in a battle for influence within the ruling but deeply divided Peronist movement.

The country’s transport network, and even crucial grain exports, ground to a halt as striking workers protested against policies that have seen purchasing power eroded by galloping inflation.