Eva Perón's Revenge - Update on the Argentine International Bond Defaults
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Argentine President Cristina Fernandez de Kirchner has authorized the Economy Ministry to carry out a swap of $20 billion of defaulted debt, paving the way for the nation’s first international bond sale since 2001. The president also allowed the issuance of as much as $15 billion of bonds in U.S. markets as part of the plan to exchange the defaulted debt, according to a decree published in today’s official gazette.Access to debt markets would help Fernandez to maintain government spending ahead of presidential elections in 2011 even as growth in tax revenue slows. Lawsuits from creditors who rejected a 2005 restructuring offer tied to the $95 billion default are preventing the government from selling bonds abroad. An Economy Ministry official said yesterday that today’s decree was needed before filing details of the swap offer with the U.S. Securities and Exchange Commission. The government plans to submit the swap to U.S. regulators by next week and expects to disclose details of the offer in January once the SEC approves it, the official said on condition he not be identified in accordance with government policy.
On the litigation front, several hedge funds, Aurelius Capital Master, Ltd., Aurelius Capital Partners, LP, and Blue Angel Capital I LLC hold final money judgments against Argentina totaling more than $553 million, excluding post judgment interest. In early 2009 they sought to enforce their judgments against Argentina's rights under a November 2001 trust contract to receive defaulted interests in Global Bonds that Argentina issued in New York through a Fiscal Agency Agreement. Judge Thomas P. Griesa of the U.S. District Court for the Southern District of New York issued temporary restraining orders with respect to these assets and converted the orders into preliminary injunctions 20 days later. In early November, 2009, the Second Circuit keep the injunction in place but remanded the case to Judge Griesa for further fact finding and on November 19, 2009, he issued additional findings of fact continuing the preliminary injunction to preserve the status quo while the court determines plaintiffs' right to a turnover order.
The creditors were not so fortunate in a companion case, Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120 (2nd Cir. 2009), which held that the hedge funds could not execute against recently nationalized Argentine pension fund assets held in the U.S.
