Argentina just lost its appeal to continue refusing to pay a group of hedge fund managers, led by Paul Singer, $US1.6 billion worth of sovereign debt dating back to its $US95 billion default in 2001.
You can read the full decision here (via Credit Slips).
For years the country has been trying to avoid paying a bunch of “vulture” hedge fund managers that refused to take a 70% haircut on Argentine bonds like every other investor. This has resulted in some wacky news items — Paul Singer getting the government of Ghana to impound an Argentine naval ship last October, President Cristina Fernandez de Kirchner flying commercial to see the Pope so her jet isn’t taken — you get the idea.
Now it’s (almost) come to a head. A New York Judge fully rejected Argentina’s appeal of a decision made last year — a decision that would’ve had it pay Singer and company in full. Argentina wanted to be able to pay hedge funds that restructured debt without making a payment to Singer (the “vulture”), and yet again that idea has been given a massive thumbs down.
The decision comes from U.S. Circuit Judge Barrington Parker and frankly, it seems like he zero patience for Argentina. He doesn’t buy the argument that paying Singer causes injury to third parties, basically implies the country hasn’t been arguing in good faith, and binds Bank of New York Mellon, Argentina’s custodial bank, to comply with it.
From the decision:
“…the proposal submitted by Argentina ignored the outstanding bonds and proposed an entirely new set of substitute bonds. In sum, no productive proposals have been forthcoming. To the contrary, notwithstanding its commitment to resolving disputes involving the FAA in New York courts under New York law, at the February 27, 2013 oral argument, counsel for Argentina told the panel that it “would not voluntarily obey” the district court’s injunctions, even if those injunctions were upheld by this Court. Moreover, Argentina’s officials have publicly and repeatedly announced their intention to defy any rulings of this Court and the district court with which they disagree…
What the consequences predicted by Argentina have in common is that they are speculative, hyperbolic and almost entirely of the Republic’s own making…
The most important argument that the Judge rejected was Argentina’s assertion that this would impact future sovereign debt restructurings (Think: Greece restructuring over and over again). He essentially says we’ll deal with those as they come.
For now, Argentina has one more recourse — The Supreme Court — and it’s not looking good.