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

Captured IS Militants Explain Why They Fought

Fighters from Turkey, Syria tell VOA Kurdish Service what drew them to extremism, jihad More

Security Experts Split on Kenyan Barrier Wall

Experts divided on whether initiative aiming to keep out al-Shabab militants is long-awaited solution or misguided effort More

Video Philippines Wants Tourists Spending Money at New Casinos

Officials say they hope to turn Manila into the next Macau, which has long been Asia’s gambling hub More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Liberia's Almost Last Ebola Patient Grateful but Still Grievingi
X
Benno Muchler
March 26, 2015 3:41 PM
Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video US, South Korea Conduct Joint Military Exercises

The Eighth U.S. Army Division and the Eighth Republic of Korea Mechanized Infantry Division put on a well orchestrated show of force for the media this week during their joint military training exercises in South Korea. VOA’s Seoul correspondent Brian Padden was there and reports the soldiers were well disciplined both in conducting a complex live fire exercise and in staying on message with the press.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.
Video

Video Young Filmmakers Shine Spotlight on Giving Back

A group of student filmmakers from across the United States joined President Barack Obama at the White House this month for the second annual White House Student Film Festival. Fifteen short films were officially selected from more than 1,500 entries by students aged 6 through 18. The filmmakers and their families then joined the president and a group of celebrities for a screening of their films. VOA’s Julie Taboh reports.
Video

Video VOA Exclusive: Interview with Afghan President Ashraf Ghani

Afghan President Ashraf Ghani, during his first visit as president to Washington, gave a one-on-one interview with VOA Afghan Service reporter Said Suleiman Ashna, about his request for a change in U.S. troop levels, the threat from the Islamic State, and repairing relations with the United States and Pakistan. The interview was held at Blair House, late Sunday, in Pashto.
Video

Video California Science Center Tells Story of Dead Sea Scrolls

The ancient manuscripts were uncovered in the mid-20th century, and they are still yielding clues about life and religious beliefs in ancient Israel. As VOA's Mike O'Sullivan reports, an exhibit in Los Angeles shows how modern science is bringing the history of these ancient documents to life.
Video

Video Angelina Jolie Takes Another Bold Step

Hollywood actress and filmmaker Angelina Jolie has revealed she had her ovaries and fallopian tubes removed to lower her odds of getting cancer. Doctors say the huge publicity over her decision will help raise awareness about the importance of cancer screening. VOA’s George Putic has more

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

More Americas News

US, Cuba Teams Discuss Telecommunications Issues

US delegation visited Cuba this week as the two nations continued efforts to restore diplomatic relations broken over 50 years ago
More

Egyptian Court Adjourns Trial of Al Jazeera Journalists to April 22

Two journalists are charged with aiding a terrorist organization, a reference to the Muslim Brotherhood, which Egypt banned following 2013 army takeover
More

Rio Exhibition Dramatizes Olympian Bay Cleanup Task

Display highlights problem of trash in Guanabara Bay, where sailing, windsurfing events are to take place in next Summer Games
More

Chile Says Drought Permanent, Lays Out Water Plan

President Michelle Bachelet says government will invest in desalinization plants and reservoirs to ensure access to potable water
More

Poll: Venezuelan Leader's Popularity Inches Up to 25%

Rise comes after United States declared Venezuela a security threat and ordered sanctions against seven officials
More

High Winds, Drought Feed Chilean Forest Fires

Blazes have ravaged swaths of China Muerta and Nalca Lolco reserves and Conguillio national park, revered for its ancient forests
More