US Appeals Court Reprieves Argentina on Debt Repayment

A US appeals court has declined to order Argentina to post a security deposit in the latest development in the country’s efforts to overturn an earlier ruling that it pay investors US$1.33bn on
defaulted bonds
.

Defaulted creditors, led by US fund Elliott Associates, wanted to force Argentina to post security of at least US$250m by the start of this week to demonstrate its willingness to pay any judgment in their favour.

However, the 4 December ruling from the from the Second Circuit Court of Appeals means there will be no change to a schedule established last week for the case, which has triggered fears of a further Argentine default following the one of a decade ago. Argentina’s government has been vocal in decrying Elliott Associates and others as “vultures”.

The case, which has ramifications for the international financial system and future sovereign restructurings, has involved other parties, including the holders of bonds issued in debt restructuring exchanges in 2005 and 2010 who feared they would not be paid.

Exchange bondholders had asked the appeals court to order Argentina to post a security of US$2bn to protect them if it upheld Elliott’s request to make a deposit, but as it was declined their request is no longer an issue. Further developments in the case are expected on 28 December 28, when Argentina must submit its appeal to the court.

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