Argentina

Argentina finds way to pay debt


Published

Argentina’s government believes that it has found a way in which to make debt payments whilst circumventing the judgement of a United States judge.

Overnight the country’s lower house passed the Sovereign Debt bill by 134 to 99 which President Cristina Fernández de Kirchner then signed, passing it into law. The bill allows the country to pay the 92.4% of debt bondholders who accepted a restructuring of debt after the 2002 default.

Payment to these debt holders had been frozen by a US court because Argentina had failed to reach a deal with a group of bond-holders known as the ‘hold-outs’ (or ‘vultures’ in Argentina) because they had refused to accept the debt restructuring going back to the country’s original default in 2002.

The new law will allow Argentina to pay the debt in any other foreign jurisdiction, including Argentina or France, rather than America and thus get around the US court order. There is some doubt as to the legitimacy of the new law based upon the original bond contracts, but for the time being it looks as though it will allow the Argentine government to pay a $200 million coupon payment which is due on 30th.

The United States judge, Thomas Griesa, had blocked the payment of $539 million in interest payments due on 30th July because Argentina had failed to address the ‘hold-out’ bondholders. This in turn had led the country into a default which could eventually affect almost $29 billion in bonds that Argentina issued overseas as part of the two rounds of discounted debt restructuring in 2005 and 2010.

On signing the law President Cristina Fernández de Kirchner said “Argentina wants to pay, it can pay and will pay all its debts to all bondholders”. She went on to say “This law not only ensures the payment of 92.4% of creditors who trusted and turned to Argentine sovereign debt restructuring, in 2005, with President Kirchner, and later, in 2010, with me, but also includes the interests of those 7.6% of bondholders who did not enter any of the two exchanges.”

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