Thursday, 31 July 2014
Last updated 7 hours ago
Sep 12 2013 | 10:22am ET
The U.S. Supreme Court will consider whether or not to take up Argentina's appeal of a lower-court decision ordering it to pay hedge-fund holdouts from its 2001 default at the end of the month.
The justices will review Argentina's petition on Sept. 30. If they make a decision on that day, it could be revealed as soon as Oct. 1. Should the choose to hear the case, arguments would likely be heard next year. If they reject the petition, the Second Circuit Court of Appeals' decision barring Argentina from making payments on its restructured debt without also paying the holdouts would stand.
If the court denies the petition or eventually upholds the Second Circuit, it could lead Argentina to default on the exchanged bonds. The country has vowed to never pay the holdouts in spite of a series of adverse rulings—including a second one from the Second Circuit last month, upholding its earlier decision—in U.S. courts.
The country has taken steps to avoid a second default in a dozen years, offering to trade exchange bonds issued under U.S. law for new ones issued under Argentine law, which would not be subject to default in the face of a defeat before the U.S. Supreme Court. And this week, the country's Parliament approved a law reopening the debt exchange for the holdouts without a time limit; the limited participation periods for the 2005 and 2010 debt exchanges has been a point of contention for U.S. judges.
The new law passed the Chamber of Deputies by a vote of 192-33.
Yesterday, Argentine President Cristina Kirchner took aim at the hedge fund holdouts, led by Elliott Management Corp. and Aurelius Capital Management. "They bought these bonds for almost nothing. Can anyone explain to me why they should be rewarded with such astronomical returns?"
The uncertainty is already hitting Argentina's purse, as Standard & Poor's cut its debt rating and suggested that further reductions may come. The agency slashed Argentina's rating—already junk at B-minus—to triple-C-plus, the same score it assigns to Cyprus and Egypt. The rating has a negative outlook.
"The lawsuit could result in the interruption of payments on bonds currently under New York jurisdiction, or it could prompt Argentina to undertake a debt exchange that we could view as distressed," S&P said. "There is at least a one-in-three chance of either occurring within the coming 12 months."
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…