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Argentina would default if forced to pay bondholders: Kicillof

AFP

A man looks the exchange rate in downtown Buenos Aires, on January 27, 2014A man looks the exchange rate in downtown Buenos Aires, on January 27, 2014

A man looks the exchange rate in downtown Buenos Aires, on January 27, 2014A man looks the exchange rate in downtown Buenos Aires, on January 27, 2014

Economy Minister Axel Kicillof warned Tuesday that if Argentina implements a new US court ruling against Buenos Aires, it would push the South American nation into default.

The US Supreme Court's refusal Monday to hear Argentina's appeals in the case meant the country would have to pay the hedge funds the full value of their bonds, even though they refused to take part in the restructuring of its debt accepted by most of the country's creditors.

Argentina had appealed a lower US court's ruling that it was bound to pay the hedge funds, which scooped up Argentine bonds at a steep discount when the country defaulted on close to $100 billion in debt in 2001.

More than 90 percent of the defaulted debt was covered in the 2005 and 2010 restructuring, but New York hedge funds NML Capital and Aurelius Capital Management refused to take part and began litigation to recover 100 percent of the bonds they held, worth at least $1.3 billion.

Argentina argued that they gave up their claim and, as well, that paying them could further hobble the country's finances.

Moreover, both Buenos Aires and the bond holders who participated in the restructuring had argued throughout the case that favoring the holdouts undermined the basis of any restructuring.

But the highest US court declined to accept the appeal, leaving the lower court's rulings against Argentina in place.

Kicillof, an economist and architect of President Cristina Kirchner's strategy, was outraged Tuesday, saying of the US judge: "My impression is that they are trying to destroy a recent deal" on which Argentina restructured debt with Paris Club debtors.

So Kicillof said he would try to speak with the US judge in the case, whom he maintains repeatedly has said he does not want Argentina to default.

"If Argentina were forced to pay (in full) to hedge fund (holdout) bondholders, the country would be pushed into default," Kicillof maintained. "We are not willing to negotiate under just any condition whatsoever."

On May 29, Argentina, fighting to stabilize its economy, obtained a deal to clear nearly $10 billion in debt arrears from official creditors in the Paris Club.

But analysts see Argentina's handling of the hedge fund problem as far more significant in terms of whether Buenos Aires might be moving toward greater reliability. And the vast potential precedent in terms of debt restructuring is important, they say.

Date created : 2014-06-18