A federal appeals court in New York wasted no time in ordering Argentina to come up with a plan to pay holdouts from its 2001 default. And Argentina, which pledged total resistance at the Wednesday hearing that led to the ruling, appears to have changed its tune.
The U.S. Second Circuit Court of Appeals on Friday asked the country to offer a proposal on how to pay the holdouts, including an affiliate of hedge fund Elliott Associates. The request, which the court said was prompted by a suggestion made by Argentina's lawyer, came after a hearing in which the court appeared unwilling to accept Argentina's bid for a stay of a lower-court order insisting it pay the holdouts, which Argentina refers to as "vulture funds."
Following the request, Argentine President Cristina Kirchner softened her bellicose rhetoric towards the holdouts, suggesting that the country would be willing to negotiate with them. Kirchner has previously pledged to give the holdouts no better deal than that offered those who accepted its bond exchanges in 2005 and 2010, and she suggested again that the haircut accepted by those investors is still the basis for a negotiation.
"We are disposed to pay these vulture funds but not on better terms than the 93% who trusted and bet on Argentina," Kirchner said in a speech before the Argentine Congress.
During Wednesday's hearing, Argentina's lawyer suggested that the country would ignore any ruling against it.
It is not clear that the court will accept such a plan; it simply asked Argentina to offer an alternative to the ruling made by U.S. District Judge Thomas Griesa, which could prevent the country from paying the exchange bondholders without paying the holdouts at par, triggering another default. Elliott's NML Capital has routinely won in the U.S. courts, including an earlier ruling from the Second Circuit.
Argentina may also be planning to attempt to skirt an adverse ruling. It may accelerate payments to the exchange bondholders, the El Cronista newspaper reported, to avoid a default.