Court seeks precise payment plan from Argentina for bondholders
3/1/2013COMMENTS (0)
By Nate Raymond
NEW YORK, March 1 (Reuters) - A U.S. appeals court ordered Argentina on Friday to provide "precise terms" for any alternative payment formula it would commit to that would resolve litigation with holders of defaulted bonds seeking to be paid $1.3 billion.
The 2nd U.S. Circuit Court of Appeals in New York entered the order two days after hearing oral arguments in the dispute. The court gave Argentina until March 29 to submit a formula and a timetable for carrying it out.
In the unsigned order, the court said Argentina at oral argument "appeared to propose" it was willing to abide by a different payment formula than the one ordered by U.S. District Judge Thomas Griesa in Manhattan.
Griesa had ordered in November that Argentina pay into escrow the full $1.33 billion owed to the holdout bondholders, led by Elliott Management affiliate NML Capital Ltd and Aurelius Capital Management. Argentina calls them vultures.
The $1.33 billion payment was due the next time Argentina made an interest payment to bondholders who participated in the country's 2005 and 2010 restructurings. About 92 percent of its bonds were restructured in 2005 and 2010, giving holders 25 cents to 29 cents on the dollar.
In its order Friday, the 2nd Circuit said that Argentina must in its written response indicate how and when it would make current obligations on the defaulted bonds, which have gone unpaid since Argentina's default in 2002.
The submission must also detail the rate Argentina proposed to pay on the defaulted bonds.
The court also asked for "what assurances, if any, it can provide that the official government action necessary to implement its proposal will be taken, and the timetable for such action."
Argentina has been adamant never to pay the holdouts a cent on their defaulted debt. In the aftermath of the tough questions Argentina faced from some of the judges in the oral arguments, the market's take on the proceedings was to bid higher, significantly, the price investors need to pay to insure their Argentine debt from default or restructuring.
Friday's ruling, while forcing Argentina to articulate its position, provides it an opportunity to open a negotiation with the holdouts, something that it has so far not believed to have done. Sources familiar with Elliott's thinking say the hedge fund, with some $20.7 billion in assets under management, is willing to do.
Representatives for NML and Aurelius either did not immediately respond to a request for comment or had no comment. A lawyer for Argentina did not respond to an email seeking comment.
The case is NML Capital Ltd et al v. Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.
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