Argentina challenges US with bond plan

NEW YORK / BUENOS AIRES - Reuters

Argentina’s Vice President Amado Boudou (L) speaks to journalists next to Economy Minister Hernan Lorenzino in this file photo. REUTERS photo

Argentina challenged a U.S. court over the weekend by proposing that “holdout” bond investors be repaid only about one sixth the money federal judges hearing the case say they are owed, setting the stage for a legal showdown in New York.

The terms offered by Argentina are the same as those accepted by bondholders who chose to participate in the country’s 2010 sovereign bond restructuring. The holdouts rejected that restructuring and are holding out for full repayment.

Aside from the implications the case has for Argentina’s finances, it could also have wide ramifications for the way future sovereign restructurings are carried around the world.

Argentina defaulted on $100 billion in sovereign debt in 2002 at the height of a financial crisis in Latin America’s third largest economy. The bondsnow under dispute were issued in New York, which is why the case is being heard in U.S. court.

Elliott Management affiliate NML Capital, one of the lead plaintiffs, has said that it will not accept 2010 terms They and other holdouts are sure to argue that Argentina’s proposal does not respond to the court’s request.

“The court said ‘You owe the holdouts $1.3 billion. Tell us how you are going to pay that to them,’” said Josh Rosner, managing director at research firm Graham Fisher & Co in New York.