Argentina on Wednesday faced a key appeals court hearing in New York in its battle not to pay $1.3 billion to holdout bondholders in a struggle rooted in the country’s 2001 debt default — and which is raising fears of a new crisis.
In a sign of the importance of the hearing for Buenos Aires, Economy Minister Hernan Lorenzino and President Cristina Kirchner’s vice president, Amado Boudou, were expected to attend.
A three judge panel at the 2nd US Circuit Court of Appeals in Manhattan was to hear arguments from the Argentine side and lawyers for the bondholders group centered on NML Capital Ltd and Aurelius Capital Management, with a decision expected only weeks, or even months from now.
Argentina defaulted on some $100 billion in debt in 2001, and has since restructured its debt twice, covering around 75 percent of the nominal value of the bonds. Almost 92 percent of the bondholders agreed to cut their losses and take the exchange bonds.
Argentina insists it should not have to repay the $1.3 billion in bonds held by holdout investment funds that refused to take part in the restructuring deal.
The two funds demand 100 percent repayment plus interest and they won backing in a US district court, alarming Argentina about a possible flood of similar new claims and potential for the country sliding into a new default.
That lower court ruling has already been reaffirmed by the 2nd Circuit and now the court is to hear arguments on the mechanics of Argentina’s repayment of the contested $1.3 billion.
The row has also dragged in exchange bond holders, who had agreed to the restructured debt, since they are now afraid that their own deals will collapse if Argentina is ordered to pay the holdouts.