U.S. judge reserves judgment on broadening Argentina debt ruling

By Daniel Bases

(Reuters) – Argentina urged a U.S. judge on Friday to not expand by another $5.4 billion the amount it must pay holders of defaulted debt before it can pay the majority of its creditors who participated in two rounds of sovereign restructurings.

U.S. District Judge Thomas Griesa adjourned the hearing in New York without ruling on the matter, saying that these creditors, along with those he ordered paid $1.33 billion plus interest, should resume settlement discussions with the South American country.

“It is very important that all parties, including the Republic,” get back to the negotiating table and settle the case, Griesa said before telling the parties he would “reserve judgment” on the motion brought by the government of Argentina.

The court appointed Special Master Daniel Pollack nearly a year ago try to obtain a negotiated settlement.

The hearing concerned 526 creditors holding over $5.4 billion in money judgments or claims who filed paperwork by March 2. But Argentina says those numbers could increase if Griesa rules for the creditors, noting that in the New York federal court alone, $10 billion in judgments against the country are pending.

The hearing marked the latest chapter in years of litigation by creditors suing for full repayment on Argentina’s bonds following its historic $100 billion default in 2002.

Argentina defaulted again in July 2014 after refusing to honor court orders to pay $1.33 billion plus interest to hedge funds the next time it paid creditors, referred to as Exchange Bondholders. These investors participated in two restructurings in 2005 and 2010, representing about 92 percent of the defaulted debt. Today they hold $28 billion in outstanding principal.

Argentina estimates the injunction ordered by Griesa based upon the principle of pari passu, or equal treatment, and which covers 13 cases, is now worth roughly $1.6 billion.

The holdout hedge funds are led by Elliott Management’s affiliate, NML Capital Ltd, and Aurelius Capital Management.

NML’s lawyer, Robert Cohen of Dechert, said he was asked to speak on behalf of most of the “me too” plaintiffs, more than 500 individuals making 34 actions in the court, who seek to be treated similarly to his clients.

“There is no reason why these bondholders shouldn’t be entitled to the same ruling,” Cohen said, emphasizing that they held the same kinds of bonds and should be entitled to the same kind of treatment as given his clients by the court.

Argentina’s lawyer, Carmine Boccuzzi of Cleary Gottlieb Steen & Hamilton, argued these new “me too” claims were too late and could not reach back having already been given judgments under different principles to fall under the pari passu claim. “They should be precluded from doing it now,” Boccuzzi said.

Cohen added that if Griesa were to grant these plaintiffs relief it would allow “all plaintiffs into the same room and promote a resolution.”

Pollack told Reuters on Friday he was in touch with both sides since the start of the year.

He said the holdouts had offered a “no preconditions” invitation to Argentina to resume direct talks, but so far Buenos Aires has not accepted the offer.

(Reporting by Daniel Bases and Nate Raymond in New York; Editing by Christian Plumb and Matthew Lewis)