Argentina Appeals Holdout Creditor Ruling from U.S. Court

Article

By Shane Romig

BUENOS AIRES--Argentina has asked the U.S. second circuit court of appeals to overturn the same court's earlier ruling in favor of the country's holdout creditors.

Argentina, along with creditors who accepted the country's earlier debt swap offers, lodged the long-shot appeal late Friday.

"The decision makes grave legal errors that magnify the error of the panel's previous unprecedented holdings," Argentina's attorneys said in the appeal.

On Aug. 23, the U.S. Second Circuit Appeals Court said Argentina can't make payments to creditors who accepted discounted swap bonds in New York unless it pays the holdout creditors at the same time. The ruling is on hold, as Argentina has appealed the decision to the U.S. Supreme Court. If the U.S. Supreme Court refuses to consider the appeal, or rejects it, Argentina will have to pay the holdout creditors or default on the swap bonds.

The appeal to the Second Circuit panel to overturn it ruling or to convene the full banc of judges to reconsider is unlikely to be successful, as the Aug. 23 ruling was unequivocal in its support of the holdout's claims.

Argentina defaulted on about $100 billion in sovereign debt during the country's economic crisis in 2001. The country offered creditors a restructuring deal of about 33 cents on the dollar in 2005 and 2010.

About 93% of the creditors took the swap, but holdouts led by Aurelius Capital Management and Elliott Management Corp.'s NML Capital Ltd., have won awards from U.S. courts of over $1.3 billion and have sought to seize Argentine assets around the globe.

Earlier this week, the holdouts convinced U.S. District Judge Thomas Griesa to order Argentina and a handful of U.S. banks to provide information on Argentine assets in the U.S., including those of state-run oil and gas companies YPF SA (YPF, YPFD.BA) and Enarsa.

So far, the holdouts have been unable to seize Argentine assets, but last year NML had an Argentine navy ship in training in Ghana held in port their for several months before a United Nations tribunal ordered it released.

Earlier this week, Argentina's senate backed a plan to reopen the debt swap offer on the same terms. The plan pushed by President Cristina Kirchner is expected to sail through the lower chamber shortly.

The new swap aims to show the country's willingness to make good on its debts and sway the U.S. Supreme Court to overturn the ruling forcing the country to pay holdout creditors the full value of their defaulted bonds. Few of the holdout creditors are expected to take the new swap, as it carries the same haircut they have rejected in the past.

A parallel plan to skirt the jurisdiction of U.S. courts by offering creditors who accepted the swaps bonds issued under New York law local bonds instead appears to be on hold pending the appeals.

Analysts say making such a move right now risks provoking U.S. courts to block it as it would be seen as open defiance of the rulings.

Write to Shane Romig at

shane.romig@wsj.com

http://online.wsj.com/article/BT-CO-20130907-701158.html#