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  HOME | Argentina

Argentina Makes Payments to Bond Holdouts, Ending 15-Year Debt Battle

BUENOS AIRES – Argentina paid $9.3 billion on Friday to holdout bondholders, including a group of American hedge funds that had successfully sued in U.S. court for full payment on sovereign debt that the country defaulted on in late 2001.

“It’s all over. We’re out of default officially and definitively,” a Finance Ministry source told EFE.

The payments were carried out after Argentina made a successful return to capital markets this week following a 15-year hiatus, raising $16.5 billion in a bond offering Tuesday that the government described as a vote of confidence by investors in business-friendly President Mauricio Macri.

Around half of the bond payments were made to four U.S. hedge funds, including Elliott Management Corp. founder and CEO Paul Singer’s NML Capital Ltd., that reached a settlement in late February with Macri’s administration.

Those large holdout creditors had successfully sued Argentina in a New York federal court after rejecting debt restructurings in 2005 and 2010, in which 93 percent of bondholders accepted steep haircuts.

Under arrangements made by Argentina’s 1976-1983 military regime, the New York federal courts have jurisdiction over litigation involving Argentine sovereign debt and Buenos Aires uses Big Apple banks to pay bondholders.

U.S. District Judge Thomas Griesa had barred Argentina from paying the exchange bondholders (those that accepted the debt swaps) until it settled with the holdouts. He lifted that order Friday after the payments were made.

Macri’s predecessor, leftist Cristina Fernandez, who stepped down last December, had refused to settle with the hedge funds and slammed them as “vultures.”

The origins of Argentina’s late 2001 default, which was then the largest in history and occurred amid a financial meltdown and economic depression, go back to the military regime, which presided over a 465 percent expansion in public indebtedness.

 

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