Saturday, 22 October 2016
Last updated 13 hours ago
Aug 8 2014 | 4:36am ET
Argentina has filed a quixotic lawsuit against the United States, even as a group of major international banks nears a deal with hedge-fund holdouts from its 2001 default that could end its current one.
A group of top banks, including Citigroup, Deutsche Bank, HSBC and JPMorgan Chase, is attempting to cobble together enough investors to buy debt held by Elliott Management, Aurelius Capital Management and other holdouts. Those hedge funds have refused to accept Argentina’s debt exchanges, and have successfully won a series of U.S. court decisions blocking the country from paying its restructured debt without also paying them. Argentina fell into default last week when it missed a $539 million payment to restructured bondholders.
Argentina has said it cannot cut a deal before the end of the year, when a clause in the restructured debt guaranteeing similar treatment to restructured creditors expires. But the hedge funds and U.S. District Judge Thomas Griesa have refused to grant it an extension until then.
The banks want investors to buy the debt and give Argentina that extra time, allowing it to make the debt payment and hammer out a global settlement next year. They hope that the move will earn them goodwill with Argentina—and working underwriting its bonds once the country regains access to international debt markets.
That can’t happen until the deadlock over the default is resolved. Terms of a deal are not clear, although Bloomberg News reports that Elliott would accept between 80 and 85 cents on the dollar for its debt, less than the full repayment ordered by the courts. Creditors who accepted the restructuring received only 30 cents.
“The banks are trying to bring people closer,” Argentine billionaire Eduardo Eurnekian, who has been approached by the banks, said. “It’s very complex. I don’t know how it gets resolved. It’s an issue for lawyers and financiers. But there’s no doubt that we want to fix this.”
The banks may offer financing to buyers of the debt, according to Bloomberg.
Separately, Argentina has asked the International Court of Justice to hear its lawsuit against the U.S., alleging that Griesa’s decisions—backed by the U.S. Supreme Court—are a violation of its sovereignty. There’s little chance that the case will actually reach the Hague: In the absence of a bilateral ICJ treaty between the two countries, the U.S. would have to give the court permission to hear the case, something that has happened only 22 times in the last 68 years.
It is unclear what Argentina hopes to achieve with the petition, other than to make good on a public pledge. The country has adopted an even more strident tone since the default last Wednesday, accusing Griesa of bias, the judge’s mediator of incompetence and President Barack Obama of weakness for refusing to “put limits on this judge”—which he cannot constitutionally do. The war of words has led Griesa to call a meeting for 3 p.m. today, where he will address the country’s recent statements.