Argentina Defies US Court Orders on Debt Repayment

Argentina’s economy minister Axel Kicillof said that the government will seek to restructure debt held by foreign creditors under local law and the country will continue its resistance against so-called ‘vulture funds’.

He spoke a day after the president, Cristina Fernandez, said that the country will refuse to comply with a US supreme court order for it to pay US$1.5bn to ‘holdout’ investors, led by hedge funds Aurelius Capital Management and NML Capital, in the latest chapter of a decade-long battle over Argentina’s defaulted debt.

In a nationally broadcast address, Fernandez expressed willingness to negotiate with Argentina’s creditors, but insisted that it was impossible for the country to pay the amount in cash, in full, by the end of this month as ordered by the US courts. “What I cannot do as president is submit the country to such extortion,” she added.

The US supreme court upheld a New York district court ruling that Argentina must deliver US$907m to the plaintiffs before June 30, or lose the ability to use the US financial system to pay an equal amount to holders of other Argentine bonds.

That could mean defaulting on the vast majority of the country’s performing debts, which are held by bondholders who agreed previously to provide debt relief that enabled Argentina to recover from its economic crisis of 2001.

Kicillof said that the Argentine government also plans to send lawyers to speak to Thomas Griesa, the judge behind the New York district court ruling.

“If Griesa’s sentence is implicated?.?.?.?and Argentina has to pay the vulture funds, this would push Argentina into a default,” Kicillof said, adding the funds were undermining government efforts made with debt restructuring programmes in 2005 and 2010.

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