- POSTED: 21 Aug 2014 02:09
Argentina said on Wednesday (Aug 20) it will pay all its creditors in Buenos Aires, seeking to circumvent a US court order barring it from repaying the debt it restructured after its 2001 default.
BUENOS AIRES: Argentina said on Wednesday (Aug 20) it will pay all its creditors in Buenos Aires, seeking to circumvent a US court order barring it from repaying the debt it restructured after its 2001 default.
The move aims to work around US District Court Judge Thomas Griesa's ruling in favor of two "holdout" creditors refusing to accept a write-down on their bonds, which has blocked Argentina from servicing its restructured debt and forced it into a new default.
But it is unlikely to resolve the country's dispute with the two hedge funds that took it to court for US$1.3 billion (S$1.6 billion), NML Capital and Aurelius Capital Management, which Argentina calls "vulture funds."
The announcement comes after President Cristina Kirchner said on Tuesday that Argentina was replacing Bank of New York Mellon, the bank responsible for transferring its debt payments to creditors, with the Argentine state-run Banco Nacion Trust.
Bank of New York Mellon has frozen the US$539-million (S$674 million) interest payment that Argentina was due to make to so-called "exchange" bondholders on June 30, in line with Griesa's ruling.
Argentine Economy Minister Axel Kicillof said creditors would not be required to accept the switch. "Every bondholder can seek and request another seat of payment," he told a press conference.
He said holdout creditors would be welcome to sign up for the plan like all other bondholders, if they accepted the same write-down - which he acknowledged billionaire speculator Paul Singer, the founder of NML's parent company, was unlikely to do.
The holdouts "can come and exchange those bonds and if they do it they will achieve profits of 300 percent. Is that too little for Mr Singer? Yes, because he's a vulture, but we're going to pay him," Kicillof said.
NML stands to make a profit of 1,600 percent if it manages to make Argentina pay it the full US$800 million (S$1 billion) Griesa's ruling awarded it.
The Argentine government has sent a bill enacting the bank change to Congress, where it has a majority. Kirchner would need to sign the bill into law in time for the switch to be made by September 30, when Argentina is due to pay exchange bondholders another US$200 million (S$250 million).