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

Photogallery Pistorius Sentenced, Taken to Prison

Pistorius, convicted of culpable homicide in shooting death of girlfriend Reeva Steenkamp, will likely serve about 10 months of five-year sentence, before completing it under house arrest More

UN to Aid Central Africa in Polio Vaccinations

Synchronized vaccinations will be conducted after Cameroon reports a fifth case of the wild polio virus in its territory More

WHO: Ebola Vaccine May Be in Use by Jan.

WHO assistant director Dr. Marie Paule Kieny says clinical trials of Ebola vaccines are underway or planned in Europe, US and Africa More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
After Decades of Pressure, Luxembourg Drops Bank Secrecy Rulesi
X
October 21, 2014 12:20 AM
European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Young Nairobi Tech Innovator on 'Track' in Security Business

A 24-year-old technology innovator in Nairobi has invented a tracking device that monitors and secures cars. He has also come up with what he claims is the most robust audio-visual surveillance system yet. As Lenny Ruvaga reports from the Kenyan capital, his innovations are offering alternative security solutions.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video North Carolina Emerges as Key Election Battleground

U.S. congressional midterm elections will be held on November 4th and most political analysts give Republicans an excellent chance to win a majority in the U.S. Senate, which Democrats now control. So what are the issues driving voters in this congressional election year? VOA National Correspondent Jim Malone traveled to North Carolina, one of the most politically competitive states in the country, to find out.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.

All About America

AppleAndroid

More Americas News

Multimedia PM: Canada 'Will Never Be Intimidated' by Terrorists

Stephen Harper says Wednesday's attack, along with another incident this week that led to a soldier's death, are grim reminders that Canada is not immune to terrorism
More

Video US Political Parties Face Challenge Motivating Hispanics

As November 4 midterm elections loom, Latino activists, who are mostly Democrats, say they are disappointed and angry with president over immigration reform
More

Multimedia Canadian Prime Minister Speaks After Shots Fired in Parliament

Stephen Harper said Wednesday's attack, along with another incident this week that led to a soldier's death, are grim reminders that Canada is not immune to terrorism
More

Head of Mexican Cartel Appears in US Court

Juan Francisco Saenz-Tamez was arrested by US federal agents while shopping in Texas
More

Egypt Sets Appeal Date for Al Jazeera Journalists

Journalists were convicted in July on charges of aiding terrorist organization in verdict condemned internationally
More

Canadian Soldier Dies in Car Attack Linked to Radical Islam

Police shoot and kill driver - suspected Islamic radical - after he rammed into two soldiers Monday in parking lot in Quebec province
More