Argentina loses US appeal on bondholders

Argentina yesterday lost an appeal of a US court ruling that would force it to pay $1.33 billion (€994 million) to bondholders that rejected debt restructurings after its milestone 2001 default on almost $100 billion.

The decision represents an important victory for what Argentina disparagingly calls “vulture funds”. It also revives market fears that the South American country could be moving towards its second default in just over a decade.

The dispute has important implications for future sovereign debt restructurings.

The second US circuit court of appeals in New York said enforcement of the injunctions would be delayed pending resolution of an appeal to the US supreme court, which last year ordered Argentina to pay the so-called “holdout” bondholders. Earlier this year Argentina asked the supreme court to review the case as it continues its dispute with the creditors led by Elliott, a US fund, who bought debt cheaply after the 2001 default and have sued to collect in full.

“This will take time to resolve and the politics could change before it is. The final chapter of this saga hasn’t been written yet,” said a lawyer familiar with the case.

Argentina’s first bond restructuring took place in 2005. In that, and a second debt swap in 2010, Argentina restructured some 93 per cent of its defaulted debt with a steep writedown. – (Copyright The Financial Times Limited 2013)