Hedge Funds Dismiss Argentina Payment Offer

Apr 23 2013 | 1:14pm ET

Elliott Management Corp., Aurelius Capital Management and other holdouts from Argentina's 2001 default have rejected the country's latest offer to pay them.

The holdouts blasted the proposal submitted by Argentina to the U.S. Second Circuit Court of Appeals, which is considering whether to force the country to pay the hedge funds and other who have rejected Argentina's previous exchange offers. The country's proposal to the court is similar to the terms it gave those who exchanged debt in 2005 and 2010, roughly 15 cents on the dollar.

"Not only are the details of Argentina's proposal unacceptable and unresponsive; Argentina fails even to provide this court with meaningful 'assurances' that it will actually comply with its own proposal," Theodore Olson, a lawyer for the holdouts, wrote in a Friday brief.

Olson also rejected Argentina's argument that forcing it to pay the holdouts the full $1.47 billion they seek would open it up to legal claims from exchange bondholders, who could seek more than its central bank's reserves. He argued that paying Elliott, Aurelius and the others at par would not be a voluntary offer that would trigger the "rights upon future offers" clause in the 2005 and 2010 bonds.

The holdouts' rejection leaves it to the court to decide. In November, a lower-court judge ordered Argentina to pay them in full and lifted his stay of that decision. The Second Circuit is now considering that stay; at a hearing in February, it seemed inclined to favor the hedge funds. If it does, it could force Argentina to default on its exchange debt.

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