Argentine debt row ratchets up a notch

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BR POSTAL Bloomberg Postal workers deliver the post through the streets of Rio de Janeiro, Brazil. Brazilian postal workers are among the victims of Argentina's default. The Postalis, the postal worker pension fund, saw an investment of $168 million (R1.8 billion), operated by the Bank of New York Mellon, which has debt securities linked to the Argentine in the portfolio, record losses of 51 percent. Photo: Bloomberg

Mariano Andrade New York

THE US JUDGE presiding over Argentina’s debt dispute with two American hedge funds threatened on Friday to hold the country in contempt of court for “false and misleading” statements.

The warning came after Argentina accused US District Judge Thomas Griesa of overstepping his jurisdiction by blocking the country from servicing its restructured debt until it settles its $1.3 billion (R13.8bn) dispute with the hedge funds.

The Argentine government made that argument in a two-page advertisement last Thursday in the New York Times and Wall Street Journal after Griesa’s ruling forced the country into default for the second time in 13 years.

Griesa condemned the adverts, which were called “legal notices” and urged creditors to replace the bank the judge had barred from disbursing their interest payments, Bank of New York Mellon, where an overdue $539 million Argentine payment is frozen.

“The court warns against further false and misleading statements by the Republic and assumes that this warning will be heard,” said the judge.

“If not, it will be necessary to consider contempt of court.”

Argentina could be fined if found in contempt. The messy court battle stems from the South American country’s 2001 economic crisis, when it defaulted on more than $100bn in debt.

It persuaded most of its creditors to accept a 70 percent write-down in deals reached in 2005 and 2010.

But plaintiffs NML Capital and Aurelius Capital Management, which bought up Argentine debt for pennies on the dollar when it was in default, refused to sign up for the restructuring plan and took the country to court.

Argentina has condemned its opponents as “vulture funds”, dismissed Griesa as “incompetent” and biased, and called on the US government to intervene.

The economy ministry said on Friday that Argentina’s position was unchanged after Griesa’s remarks at the hearing, saying Buenos Aires would not bow to the judge’s new “pressures and contradictions”.

On Thursday it sought to haul the US before the International Court of Justice over the dispute.

The Hague-based court said Argentina was suing the US for violating its sovereignty.

But the court would only hear the case if Washington accepted its jurisdiction, something the state department ruled out on Friday.

“We do not view the ICJ as an appropriate venue for addressing Argentina’s debt issues and we continue to urge Argentina to engage with its creditors to resolve remaining issues with bondholders,” said a spokesman.

Argentina says yielding to the hedge funds could expose it to more than $100bn in claims for equal treatment from the 92 percent of creditors who had agreed to a write-down.

International banks including Deutsche Bank, Citigroup, JPMorgan and HSBC are reportedly in talks with the hedge funds to resolve the impasse by buying up their bonds so Argentina can exit its default.

“The talks are very fluid,” a source close to the negotiations said on Friday.

– Sapa-AFP


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