• Aug. 21, 2017, 7:05 am

Argentina debt holdouts seek to broaden scope of court injunction

By Daniel Bases

NEW YORK (Reuters) – Argentina debt holdouts on Monday asked a U.S. court to make more of the country’s debt, including bonds issued last month, subject to a prior court order blocking the country from making payments on its obligations without paying the holdouts as well.

Aurelius Capital Management, one of the lead holdout investors in defaulted Argentina sovereign debt, wants its prior victory in U.S. District Court on the principal of pari passu, or equal treatment, extended to all the country’s external indebtedness.

Argentina’s economy ministry responded by saying this was “a new attempt at extortion” that would achieve nothing toward the effort to negotiate a fair solution.

At issue is the treatment of Argentina’s BONAR bonds, which are denominated in U.S. dollars but governed by local law. The government issued $1.4 billion in BONAR 2024 bonds last month in order to raise desperately needed capital.

Aurelius and other holdouts contend the government is issuing this kind of debt to get around the order, which entitles the holdouts to be paid in full for the defaulted bonds they hold.

“Argentina’s BONAR 2024 Bonds and its other External Indebtedness also are subject to the Equal Treatment Provision, and Argentina can present no reason why it should be allowed to issue more of these bonds and make payments on these bonds without making a ratable payment under Plaintiffs’ bonds,” Aurelius said in its filing.

Aurelius Chairman Mark Brodsky said in a statement emailed to media organizations that Argentine Economy Minister Axel Kicillof’s boasts that Argentina’s BONAR 2024 issuance was international proves the point that the government is thumbing its nose at the U.S. courts.

“Mr. Kicillof likes to brag that the recent BONAR 24 offering was international. We agree. That makes those bonds subject to our pari passu covenant. The hedge funds that piled into these richly priced bonds did so with eyes wide open,” said Brodsky.

Argentina’s economy ministry contended that the bonds were “domestic debt” that had “nothing to do with Judge Griesa’s jurisdiction”.

NML Capital, another lead holdout creditor, filed a similar motion to Aurelius saying that Argentina still refuses to negotiate a settlement.

“By now, it is clear that the Republic is engaged in a systematic effort to evade U.S. court orders indefinitely,” an NML spokesman said in a statement emailed to media.

“NML will continue to enforce its rights against the Republic and any third party that assists the Republic in its violations.”

(Reporting by Daniel Bases in New York, Sarah Marsh in Buenos Aires and Davide Scigliuzzo of IFR in New York; Editing by Jonathan Oatis)

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