Appeals Court Denies Argentina

Nov 19 2013 | 12:39pm ET

A federal appeals court will not reconsider its August decision ordering the country to pay hedge-fund holdouts from its 2001 default.

The U.S. Second Circuit Court of Appeals yesterday rejected Argentina's motion for an "en banc" rehearing of the case by the full court. A three-judge panel of the court in August rejected Argentina's plea to throw out the ruling by U.S. District Judge Thomas Griesa, which could push Argentina to default on its restructured debt.

The court did leave a stay of Griesa's ruling in place to allow Argentina to make a second appeal to the U.S. Supreme Court, which last month declined the hear the case. The high court will not likely decide whether to change its mind until next year.

"The Supreme Court previously rejected Argentina's appeal and today's unanimous decision of the Second Circuit only reinforces that Argentina's self-serving pleas do not warrant the Supreme Court's attention," Theodore Olson, a lawyer for Elliott Management's NML Capital division, said.

The Second Circuit decision leaves in place an order that Argentina must pay $1.33 billion to holders of its defaulted debt before it can pay holders of its restructured debt. The country has vowed never to pay the holdouts, which it calls "vulture funds," a stance that could lead to its default on the newer debt. The country has sought to avoid that by offering investors an exchange of debt issued under U.S. law for debt issued in Argentina.

Holders of the exchanged debt, including other hedge funds, are pushing for a deal to end the litigation prior to a default.

"In an attempt to create a solution for a decade-old standoff, exchange bondholders have held several meetings over the last couple of weeks and are forming an ad hoc group and a steering committee to formalize a proposal for a global resolution, end litigation and avoid a default by Argentina," Gramercy Funds Management's Robert Koenigsberger said.

That effort was dismissed by NML.

"We welcome the idea of good-faith negotiations with Argentina, but we don't see the point of negotiating with other bondholders," a spokesman for the hedge fund told Reuters.

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