- Title: ARGENTINA: Argentina wins debt reprieve, default averted for now
- Date: 29th November 2012
- Summary: BUENOS AIRES, ARGENTINA (FILE) (ORIGINALLY 4:3) (REUTERS) VARIOUS OF ARGENTINES PROTESTING IN 2002
- Embargoed: 14th December 2012 12:00
- Location: Argentina
- Country: Argentina
- Topics: Economy,Politics
- Reuters ID: LVA47P2DCJ5UI3U90N9KGKWIX7WK
- Story Text: Argentina wins reprieve to avoid paying $1.33 bln to "holdout" bondholders, says it will make December debt payments on time.
Argentina's government breathed a sigh of relief on Thursday (November 28) after it won a reprieve on paying 1.3 billion U.S. dollars next month to "holdout" investors who are battling to be paid in full for bonds that were defaulted on in 2002, during an economic crisis.
The ruling gives Argentina a reprieve against having to pay $1.33 billion next month to "holdout" investors who rejected a restructuring of its defaulted debt and have waged a long legal battle to be paid in full.
Argentina's President Cristina Fernandez on Wednesday (November 28) - before the reprieve was announced - that her nation was paying off its debts.
"We have been paying (the debt) on time since 2005 without accessing the capital markets, using our own funds and resources. And we are going to continue doing it because we are going to honour our obligations as expected of a country that has recovered its self-esteem," Fernandez said during the Argentina-Brazil Industry Conference.
Last week, U.S. District Judge Thomas Griesa ordered Argentina to deposit the $1.33 billion payment by Dec. 15 for investors who rejected two restructurings of bonds left over from its massive 2002 default.
Griesa's order raised the risk of a technical default on about $24 billion worth of debt because it meant that if Argentina sticks to its position of not paying the holdouts, it would also be barred from paying investors who agreed to take a severe haircut in two debt exchanges in 2005 and 2010.
Branding the holdouts as "vulture funds," the government has vowed never to pay them and it swiftly appealed Griesa's ruling.
Argentina argued that, if left to stand, the order would make future restructurings impossible for countries facing debt crises because creditors would have no incentive to exchange their bonds at a discount.
Argentine economist Esteban Tombolini said the ruling was a move in the right direction.
"The relevance of the Argentine case in the courts in New York is the role played by the United States of North America because the American treasury presented a case known as 'amicus curiae'. It's like saying a third party is showing support for the Argentine position, considering that this could become a 'leading case', because the question is those who do not join the voluntary restructuring of the debt that was offered by the countries and go before the courts to litigate to the end in order to obtain more than what is coming in then what would be the parameters of the re-negotiation to restructure future debts?," he said.
"Remember that we have Greece, we have Portugal, Spain and even Italy that could also need restructuring of their public debts and this would be an awful signal. Additionally, this type of ruling would completely leave out the option of the state New York as the place that could generate the payments which, to date, have been carried out," Tombolini added.
Griesa has often voiced frustration with Argentina in court and was riled by recent statements from government officials saying that the country would defy his orders.
Fernandez suggested it was a way of punishing Argentina.
"Those of us who were bankrupt can attest that with much effort and articulation and the country's re-industrialisation and the development of our internal market, we can move forward. Maybe it is for that reason - because we constitute the counter-model of a world where capital and its derivatives have been established by owners - they want to punish us," she said.
In its decision on Wednesday, the 2nd U.S. Circuit Court of Appeals put off until well into 2013 a ruling on whether or not Argentina will have to pay in full the holdouts who refused to participate in its two restructurings, which paid less than 30 cents on the dollar.
Both Argentina and bondholders who took part in the debt exchanges filed appeals to the 2nd Circuit against Griesa's order. The appeals court will hear oral arguments on Feb. 27.
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