A New York court has ruled in Argentina’s favour following a decade-long dispute with so-called ‘holdout’ bondholders. Led by US billionaire Paul Singer’s Elliott Management firm, the holdout bondholders refused to accept a haircut on debt obligations after one of Argentina’s numerous defaults in 2001.
The new ruling should see Argentina once again able to raise capital on international credit markets.
These holdout bondholders had previously attempted to pursue their claims in US courts, which initially ruled in their favour, saying that the holdouts were entitled to be repaid the full face value of the held bonds. However, while sovereign immunity laws had prevented attempts to seize Argentinian assets in order to recover loses, the dispute had essentially locked Argentina out of international capital markets.
A 2014 US court ruling decreed that Argentina could not service any international debt or raise new credit without first servicing those of the holdout bondholders. It refused to do so, and so the country faced another default on its debt in 2014.
However, US District Judge Thomas Griesa has now ruled that the order barring Argentina from international capital markets should be dropped, so long as Argentina repeals its own law that had barred it from making any repayment to holdout bondholders.
Under the previous Argentinian government of Cristina Kirchner, laws barred the nation from repaying back of any debt to holdout bondholders, whom she termed as “vultures” and “financial terrorists”. Argentina’s new president, Mauricio Macri, has shown a more conciliatory approach to the dispute, previously announcing that he intends to reach a compromise with the holdout creditors.
