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

Ukraine: Mysterious 'Roaming Tank' Reportedly Takes Aim at Smugglers

Ukraine's TV, print media, Facebook abuzz with reports a 'roaming tank' is on the loose, destroying vehicles of those involved in smuggling More

US Wildlife Service Begins Probe of Killing of Cecil the Lion

Minnesota man accused of killing beast is in hiding, has been asked to contact US officials; White House to review extradition petition More

Video Kerry Tour Will Cover Security, Iran Nuclear Deal

US secretary of state to visit 5 countries in the Middle East, South Asia in bid to strengthen economic and security ties, ease concerns over deal with Tehran More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Booming London Property a ‘Haven for Dirty Money’i
X
July 29, 2015 9:34 PM
Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.
Video

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.
Video

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle reports.
Video

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.
Video

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.
Video

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.

VOA Blogs

More Americas News

Venezuela Troops Occupy Polar Food Distribution Warehouses

Move follows months of accusations by President Nicolas Maduro that Polar, country's largest private employer, working to sabotage the economy
More

Brazil Nuclear Leader's Arrest May Stymie Atomic Ambitions

Othon Luiz Pinheiro da Silva arrested Tuesday for allegedly taking 4.5 million reais in bribes from engineering firms working on long-delayed Angra 3 power plant
More

Chileans Spooked by Crime, Demand Government Action

Hundreds took to streets of affluent Santiago neighborhoods Wednesday to protest what they say is explosion in crime in one of South America's safest nations
More

Bright Colors, Patterns Prevail at Colombiamoda Fashion Shows

Designers and brands show off a plethora of creations on catwalks in Medellin this week
More

Report: Rio's Filthy Waters Far From Ready for Olympics

An AP investigation found extremely high levels of viruses and bacteria from human sewage in Olympic and Paralympic venues for swimming and boating
More

Peru Forces Raid Coca Region Rebel Slave Camp

Special forces rescue 26 children, 13 women, some of whom had been held captive for three decades, when they raided jungle camp of Shining Path rebels
More