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.
    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

    Russian Censorship Group Seeks Chinese Help to Better Control Internet

    At recent Safe Internet League forum in Moscow, speakers from both nations underscored desire for authorities to further limit and control information online

    First Human Head Transplant Planned for 2017

    Italian neurosurgeon, assisted by team of 100 medical staff, to perform 36-hour surgery on Russian man with debilitating muscle-wasting disease

    Biden Urges Global Focus on Cancer as a 'Constant Emergency'

    At Vatican conference on regenerative medicine, Vice president notes that cancer kills more than 3,000 people each day in US alone

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Turkish Kurd Islamist Rally Stokes Tensionsi
    X
    April 29, 2016 12:28 AM
    In a sign of the rising power of Islamists in Turkey, more than 100,000 people recently gathered in Diyarbakir, the main city in Turkey’s predominantly Kurdish southeast, to mark the birthday of the Prophet Muhammad. The gathering highlighted tensions with the pro-secular Kurdish nationalist movement. Dorian Jones reports from Diyarbakir.
    Video

    Video Turkish Kurd Islamist Rally Stokes Tensions

    In a sign of the rising power of Islamists in Turkey, more than 100,000 people recently gathered in Diyarbakir, the main city in Turkey’s predominantly Kurdish southeast, to mark the birthday of the Prophet Muhammad. The gathering highlighted tensions with the pro-secular Kurdish nationalist movement. Dorian Jones reports from Diyarbakir.
    Video

    Video Pakistani School Helps Slum Kids

    Master Mohammad Ayub runs a makeshift school in a public park in Islamabad. Thousands of poor children have benefited from his services over the years, but, as VOA's Ayesha Tanzeem reports, roughly 25 million school-age youths don't get an education in Pakistan.
    Video

    Video Florida’s Weeki Wachee ‘Mermaids’ Make a Splash

    Since 1947, ‘mermaids’ have fascinated tourists at central Florida’s Weeki Wachee Springs State Park with their fluid movements and synchronized ballet. Performing underwater has its challenges, including cold temperatures and a steady current, as VOA’s Lin Yang and Joseph Mok report.
    Video

    Video Somali, African Union Forces Face Resurgent Al-Shabab

    The Islamic State terror group claimed its first attack in Somalia earlier this week, though the claim has not been verified by forces on the ground. Meanwhile, al-Shabab militants have stepped up their attacks as Somalia prepares for elections later this year. Henry Ridgwell reports there are growing frustrations among Somalia’s Western backers over the country’s slow progress in forming its own armed forces to establish security after 25 years of chaos.
    Video

    Video Bangladesh Targeted Killings Spark Wave of Fear

    People in Bangladesh’s capital are expressing deep concern over the brutal attacks that have killed secular blogger, and most recently a gay rights activist and an employee of the U.S. embassy. Xulhaz Mannan, an embassy protocol officer and the editor of the country’s only gay and transgender magazine Roopban; and his friend Mehboob Rabbi Tanoy, a gay rights activist, were hacked to death by five attackers in Mannan’s Dhaka home earlier this month.
    Video

    Video Documentary Tells Tale of Chernobyl Returnees

    Ukraine this week is marking the 30th anniversary of the world's worst nuclear accident, at the Chernobyl nuclear power plant. Soviet officials at first said little about the accident, but later evacuated a 2,600-square-kilometer "exclusion zone." Some people, though, came back. American directors Holly Morris and Anne Bogart created a documentary about this faithful and brave community. VOA's Tetiana Kharchenko reports from New York on "The Babushkas of Chernobyl." Carol Pearson narrates.
    Video

    Video Nigerians Feel Bite of Buhari Economic Policy

    Despite the global drop in the price of oil, Nigerian President Muhammadu Buhari has refused to allow the country's currency to devalue, leading to a shortage of foreign exchange. Chris Stein reports from Lagos businessmen and consumers are feeling the impact as the country deals with a severe fuel shortage.
    Video

    Video  Return to the Wild

    There’s a growing trend in the United States to let old or underused golf courses revert back to nature. But as Erika Celeste reports from one parcel in Grafton, Ohio, converting 39 hectares of land back to green space is a lot more complicated than just not mowing the fairway.
    Video

    Video West Urges Unity in Libya as Migrant Numbers Soar

    The Italian government says a NATO-led mission aimed at stemming the flow of migrants from Libya to Europe could be up and running by July. There are concerns that the number of migrants could soar as the route through Greece and the Balkans remains blocked. Western powers say the political chaos in Libya is being exploited by people smugglers — and they are pressuring rival groups to come together under the new unity government. VOA's Henry Ridgwell reports.
    Video

    Video Russia’s TV Rain Swims Against Tide in Sea of Kremlin Propaganda

    Russia’s media freedoms have been gradually eroded under President Vladimir Putin as his government has increased state ownership, influence, and restrictions on critical reporting. Television, where most Russians get their news, has been the main target and is now almost completely state controlled. But in the Russian capital, TV Rain stands out as an island in a sea of Kremlin propaganda.

    Special Report

    Adrift The Invisible African Diaspora

    More Americas News

    Puerto Rico Reports First Zika-related Death Amid Outbreak

    Puerto Rico's health secretary Rius says that a 70-year-old man infected with Zika died in February from a drop in blood platelets; The U.S. territory has seen more than 600 Zika cases

    Rio Olympic Flame Visits UN Office in Geneva

    Flame, which was lit in Greece last week, was brought to UN for first time before it heads to Brazil for torch relay ahead of opening ceremony in Rio on Aug. 5

    Britain Foreign Secretary Visits Cuba for First Time in Nearly 60 Years

    Philip Hammond signed several cooperation agreements on energy, education and financial services

    In 'Papa,' Hemingway Returns to Cuba via Silver Screen

    Film about Nobel Prize-winning author is first full-length Hollywood feature produced on island since 1959 Cuban Revolution

    Victims of Chile Colony Hope German Documents Bring Justice

    For three decades beginning in 1961, the enclave of Colonia Dignidad, or Dignity Colony, founded by Paul Schaefer, was the site of torture, slavery and child abuse

    South Korean Olympians to Wear Mosquito-Repellent Uniforms

    The uniforms are meant to ward off mosquito-borne transmission of the Zika virus