News / Americas

Top US Court Won't Hear Argentina Bond Dispute Appeal

Visitors to the Supreme Court are pictured in the rain in Washington, Oct. 7, 2013.
Visitors to the Supreme Court are pictured in the rain in Washington, Oct. 7, 2013.
TEXT SIZE - +
Reuters
— The U.S. Supreme Court on Monday declined to hear a preliminary appeal filed by Argentina over its battle with hedge funds that refused to take part in two debt restructurings that sprang from the country's 2002 default.
 
While not good news for President Cristina Fernandez - who over the weekend was ordered to bed for a month with a cerebral hematoma, taking her out of action three weeks before a key mid-term election - the court's decision did not alter a lower U.S. court's stay on a ruling ordering Argentina to pay the funds.
 
World markets are watching the case for the implications it might have on future sovereign debt restructurings. The International Monetary Fund has voiced fear that if Argentina is forced to pay the holdouts, it would make it more difficult for cash-strapped countries to re-negotiate their bond obligations.
 
Market reaction to the Supreme Court announcement was muted, with economists stressing the importance of the maintenance of the stay. Argentina's sovereign risk spread tightened 7 basis points to 998 over safe-haven U.S. Treasuries while the rest of JP Morgan's Emerging Market Bond Indez Plus was flat at 344 basis points, indicating that Argentina remains the biggest default risk in the market.
 
“The Supreme Court's decision to not hear our appeal this session does not change anything,” Finance Secretary Adrian Cosentino said in a statement, citing litigation pending in lower U.S. courts, which could lead to another request for high court review.
 
“Argentine will continue defending itself using all available legal avenues,” the statement said.
 
Argentine President Cristina Fernandez de Kirchner attends a rally in the San Juan province in this photo taken and provided on Oct. 3, 2013 by the Argentine Presidency.Argentine President Cristina Fernandez de Kirchner attends a rally in the San Juan province in this photo taken and provided on Oct. 3, 2013 by the Argentine Presidency.
x
Argentine President Cristina Fernandez de Kirchner attends a rally in the San Juan province in this photo taken and provided on Oct. 3, 2013 by the Argentine Presidency.
Argentine President Cristina Fernandez de Kirchner attends a rally in the San Juan province in this photo taken and provided on Oct. 3, 2013 by the Argentine Presidency.
Fernandez sidelined
 
But with the combative Fernandez sidelined ahead of a mid-term vote that will determine the clout she enjoys in Congress during her final two years in power, analysts said the legal and political winds were not blowing in her government's favor.
 
“What is becoming clear is that Argentina is slowly getting closer to an unfavorable ruling, ordering it to pay the holdout hedge funds,” said Pablo Lavigne, an economists with Datarisk, a consultancy in Buenos Aires.
 
Fernandez vows never to pay the holdouts, whom she derides as “vultures” for picking over the bones of the 2002 default, which pushed millions of middle class Argentines into poverty.
 
But refusal to pay the holdouts in the face of a final U.S. court order to do so could pave the way for another default, as Argentina would be blocked from paying the holders of restructured bonds as well.
 
Easily re-elected in 2011 on promises of more government intervention into Latin America's No. 3 economy, Fernandez has seen her popularity wane due to high inflation and confidence-sapping foreign exchange controls meant to halt capital flight.
 
Ordered to rest after blood was detected on her brain over the weekend, probably resulting from a fall and bump on the head she took in August, Fernandez will stay in charge of the government from her sickbed over the month ahead.
 
End game
 
Monday's Supreme Court ruling means it will not at this time review an October 2012 decision by the 2nd U.S. Circuit Court of Appeals in New York in which the court said the Argentine government had broken a contractual obligation to treat bondholders equally.
 
The Supreme Court's refusal to get involved means litigation in lower courts continues, with Argentina able to seek high court review again at a later date when there is a final ruling in the appeals court.
 
In August, that court issued another ruling, upholding a lower court's order that Argentina pay the bondholders $1.33 billion. The court stayed its decision pending possible Supreme Court review. Argentina also has asked the appeals court to reconsider its decision.
 
But the case's end-game has shifted to the political arena in Buenos Aires, where the ailing Fernandez is in the twilight of her second term and faces a likely poor showing by her candidates in the Oct. 27 mid-term election, said Gary Kleiman, of  emerging markets consultancy Kleiman International.
 
“With these judicial and political power setbacks, a compromise solution to the long holdout saga involving at least indirect negotiations could finally be on the horizon,” he said.
 
In a brief order on Monday, the Supreme Court merely said the petition was denied and that Justice Sonia Sotomayor had not taken part in the discussion, suggesting she had recused herself. Justices do not generally explain why they recuse themselves. Sotomayor had been a judge on the 2nd Circuit bench before being appointed to the Supreme Court in 2009.
 
In two restructurings, in 2005 and 2010, creditors holding around 93 percent of Argentina's debt agreed to participate in debt swaps that gave them 25 cents to 29 cents on the dollar.
 
But bondholders led by hedge funds NML Capital Ltd, a unit of Paul Singer's Elliott Management Corp, and Aurelius Capital Management went to court, seeking payment in full.
 
The case before the Supreme Court was Argentina v. NML Capital, 12-1494.

You May Like

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid

More Americas News

Jailed American Aims to Leave Cuba 'Dead or Alive'

In Havana after visiting Alan Gross, attorney Scott Gilbert say his client has lost some vision in his right eye, walks with a limp due to hip problems, has lost a tooth and is 50 kilograms lighter than at the time of his arrest
More

Oldest Living Pro Ballplayer Dead at 102

Conrado Marrero's grandson confirmed the death, which came just two days before the centenarian's 103rd birthday
More

Summit to Protect Oceans Opens

Oceans called fundamental to life
More

Actress Lupita Nyong'o is People's 'Most Beautiful' Woman

Oscar winner, 31, lauded for role in '12 Years A Slave' says she 'never dreamed' she would be praised for her looks and land on cover of weekly magazine
More

Violent Protests Erupt Near Rio's Tourist Attractions

The rioting was sparked after word spread that the body of Douglas Rafael da Silva Pereira, a dancer on Brazil's Globo television network, had been discovered
More

Russia Expels Canadian Diplomat

Reports say first secretary's expulsion in Moscow is in retaliation for deportation of Russian military attache from Russian Embassy in Ottawa
More