Wednesday, August 13 16:35:54
Argentina came out swinging today against the U.S. judge overseeing its debt default case, defying a threatened contempt order and dashing market hopes it might soon restart talks with the hedge funds suing the country.
A group of holdout investors have gone to court for full repayment on Argentine sovereign bonds that went into default in 2002. The funds rejected debt restructurings in 2005 and 2010, holding out for better terms.
U.S. District Court Judge Thomas Griesa, who has presided over the long-running legal battle, said in New York on Friday he would issue a contempt order unless Argentina stopped claiming it had met its obligations and was not in default.
Far from backing off of those assertions, Cabinet Chief Jorge Capitanich said Griesa had been paralyzed by his own lack of understanding of the case and that no new talks had been scheduled with the hedge funds.
"The proper conditions do not exist to negotiate," Capitanich said.
In 2012, Griesa ruled in favour of holdout hedge funds led by Elliott Management Corp and Aurelius Capital Ltd., awarding them $1.33 billion plus interest and barring Argentina from repaying the holders of restructured debt without paying the holdouts at the same time.
In June, Argentina deposited $539 million into an account in the Bank of New York Mellon, the intermediary, with the intention of using the funds for a coupon payment on the restructured bonds.
Griesa ruled that deposit violated his 2012 order and ordered the money frozen. As a result, Argentina effectively missed the coupon payment after a grace period ended on July 30, pushing it into default on its restructured debt.
Holders of the restructured bonds have asked Griesa to allow Bank of New York Mellon to release the money so they can get paid, and Capitanich criticized the judge for not acting on those requests.
"His lack of decision clearly comes from not understanding the process, not understanding Argentina's status as a sovereign country, not understanding that his actions violate sovereign immunity, which transcends judicial concerns and enters the realm of international relations, which are managed by the executive branch of the U.S. government," Capitanich said.
With no negotiations scheduled, the case is in limbo while international banks struggle to reach a deal to buy some of the debt held by the holdouts.
"The judge cannot issue an order of contempt because he cannot enforce it against a sovereign country," Capitanich said.
"He cannot embargo the funds because they do not belong to Argentina, but to the (restructured) bondholders. The judge cannot make any decision because he knows he would be effectively violating contracts," he added. (Reuters)
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