Argentina’s options narrow after Supreme Court rejects review
US ruling leaves pari passu decision intact, June 30 deadline looms
Argentina’s financial policy makers looked boxed
into a corner on Monday after the US Supreme court rejected a
request to review a lower court’s decision.
|| No room to move: traffic stalls in central
Source: Leandro Kibisz
The earlier ruling had said Argentina must pay holdout
creditors, led by NML Capital, in full, before servicing the
debt it has restructured from its 2002 default.
Monday’s decision is set to force the country to
pay billions of dollars to holdout creditors. It comes just
days ahead of the next coupon payment date on the restructured
"Argentina may not continue to make interest payments to the
exchanged bondholders without entering into some sort of
agreement with NML Capital, otherwise it will be in contempt of
the injunction," said Richard Samp, chief counsel at the
Washington Legal Foundation.
The decision comes two weeks after Argentina reached a deal
to pay back
$9.7bn of arrears to the Paris Club of creditor countries,
and will put further pressure on the country’s
Argentina has four options, says Kathryn Rooney Vera, a
macroeconomic strategist at Bulltick Capital: comply with the
decision and pay; negotiate with holdouts to reach a
settlement; swap the restructured bonds into to Argentine law
instruments - or default.
"The option of complying is complicated by the capacity to
do so," Rooney Vera told LatinFinance, pointing to the
country’s declining reserves. "Settling is a
distinct possibility, and I think they’ll try,
because I think the authorities are more open to negotiating
and settling with holdouts. But we have the constraint of
Due to the timing, the sovereign may default on a coupon
payment due on restructured debt at the end of the month, as it
negotiates a settlement with holdouts, she said.
A default on all the country’s obligations is
unlikely, said Samp. "A decision to default would serve no
one's interests and is certainly not a decision that Argentina
is 'forced’ to make, as it sometimes has asserted
when speculating about what it would do when this day of
reckoning was reached."
A stay on the lower court’s decision —
put in place to allow the sovereign to challenge the ruling
higher up — remains in place, but is expected to be
lifted by the lower court in "the next several days, without
regard to whether Argentina files a rehearing petition," Samp