Argentina refuses US order to repay defaulted debt

Saturday, June 21, 2014

Argentinian President Cristina Fernandez de Kirchner refused point blank to go along with a US judge’s ruling requiring a US$1.5 billion repayment of defaulted bonds on June 16.

Earlier that day, the US supreme court had backed vulture capitalist hedge fund NML Capital in its quest to extort full-value repayment for junk bonds for which it paid only fractions of their face value.

But in a national address, Fernandez said she would not submit to “extortion” and was working on ways to keep Argentina’s commitments to other creditors.

The US order requires that the $1.5 billion be paid “all together, without quotas, right away, now, in cash, ahead of all the rest” of bondholders, Fernandez said.

“This represents a profit of 1608%,” she said. “I believe that in all of organised crime there has never been a case of a profit of 1608% in such a short time.”

Owners of more than 92% of the nearly worthless debt from Argentina's 2001 default had agreed to accept new bonds worth much less than their original face value. But predatory New York billionaire Paul Singer’s firm picked up discounted bonds and sued to force Argentina to pay cash in full plus interest.

“It’s our obligation to take responsibility for paying our creditors but not to become the victims of extortion by speculators,” said Fernandez.

The ruling also has implications for the restructuring of defaulted debt by stricken countries.

JubileeUSA, which represents several anti-poverty groups, said it was dismayed the court had rewarded speculators while harming the interests of other bondholders.

Executive director Eric Lecompte said: “Unfortunately the supreme court told the financial world that this behaviour is legitimate and, even more, profitable.

“This totally undermines how the financial system restructures debt.”

[Abridged from Morning Star.]

From GLW issue 1013