Court sides with Argentina, speeding along bond settlements

Staff Writer
Columbus CEO

NEW YORK (AP) — A federal appeals court cleared the way Wednesday for Argentina to settle its debts and strengthen its ability to maneuver in worldwide markets.

The 2nd U.S. Circuit Court of Appeals turned away creditors who wanted to keep in place court-ordered protections, though Circuit Judge Christopher Droney said a lower-court judge should take steps to determine whether Argentina has met conditions he required be fulfilled before court orders against the republic are permanently lifted. The conditions include completing settlement payments.

A three-judge panel announced its decision after hearing oral arguments for more than an hour. It found a judge was within his rights to conclude that circumstances surrounding the decadelong court battle changed dramatically when Argentina's new president, Mauricio Macri, decided to let the nation negotiate deals with bondholders after he took office Dec. 10.

Since January, Argentina has reached agreements to pay more than $8 billion to creditors, mainly U.S. hedge funds.

Argentine Economy Minister Alfonso Prat-Gay, who is in New York ahead of Argentina's first international bond sale in more than a decade, said, "This is a step toward achieving normality and the kind of development that Argentina deserves."

His country is expected to sell up to $15 billion in bonds, and he said the holdout funds will be paid on April 22.

The creditors went to court in New York after Argentina in 2001 defaulted on $100 billion in bonds. Argentina invited all its bondholders to swap their bonds at steep discounts for new bonds in 2005 and 2010.

U.S. District Judge Thomas Griesa had issued orders banning Argentina from paying interest through U.S. banks to 93 percent of its bondholders, who agreed to exchange their bonds for new bonds worth 25 percent to 29 percent of their original value.

His orders protected a variety of investors, including some who bought their bonds at pennies on the dollar and made a steep profit with settlements that paid 70 percent to 80 percent of the original value.

Those who urged the appeals court Wednesday to leave court orders protecting them in place included investors who paid full price for their bonds in the 1990s and who were hoping to do better than the 70 percent payout offered to those who did not get a chance to negotiate directly with Argentina through a court-appointed mediator.

"Please do not tie our hands behind our backs," said attorney Michael Spencer, who represents more than 200 individual and small-fund bondholders with about $800 million in claims. "Any haircut for my clients is taking real money out of their pockets."

Attorney Paul Clement, representing Argentina, said the republic was working hard to re-establish its capabilities in financial markets worldwide and was not about to jeopardize that work by failing to fulfill its agreements with bondholders.

He said it was necessary for the appeals court to clear away uncertainty about court orders concerning bondholders so Argentina can raise money in financial markets to fund its agreements.

Among those who addressed the 2nd Circuit before it ruled was a lawyer representing bondholders who accepted discounted bonds in the swaps but who have not been paid billions of dollars in interest because of the U.S. court orders.

He said those investors had accepted the swaps at the urging of the U.S. and now felt held hostage by the court orders.