Published August 23, 2013
NEW YORK – Argentina on Friday lost its appeal of a U.S. judge's order requiring that it pay $1.33 billion to bondholders who refused to participate in two debt restructurings after the country's $100 billion default more than a decade ago.
But the 2nd U.S. Circuit Court of Appeals in New York delayed implementing the decision pending a ruling by the U.S. Supreme Court.
The appeals court's decision marked a major victory for the so-called "holdout" bondholders, led by NML Capital Ltd, a unit of billionaire hedge fund manager Paul Singer's Elliott Management Corp, and Aurelius Capital Management.
U.S. Circuit Judge Barrington Parker, writing for the three-judge panel, said the court believed "it is equitable for one creditor to receive what it bargained for, and is therefore entitled to, even if other creditors, when receiving what they bargained for, do not receive the same thing."
"Because the district court's decision does no more than hold Argentina to its contractual obligation of equal treatment, we see no abuse of discretion," he added.
The appellate ruling upheld a November 2012 decision that required Argentina to pay the money into a court-controlled escrow account by the time of its next interest payment to the bondholders who agreed to swap their debt in 2005 and 2010.
Dissident bondholders have long argued that Buenos Aires continues to defy U.S. law by not paying them in full. Argentina has said that if it is forced to pay the dissidents, then future sovereign restructurings would be impossible to hammer out.
Argentina has called holdouts like NML and Aurelius "vultures." About 93 percent of the country's bonds were restructured, with creditors receiving 25 cents to 29 cents on the dollar.
In October 2012, the 2nd Circuit said Argentina violated an equal treatment clause in the contracts governing its bonds.
In November, U.S. District Judge Thomas Griesa ordered Argentina to pay $1.33 billion owed to the holdout bondholders into an escrow account before making its next interest payment to creditors who participated in the restructurings.
The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.
(Reporting by Nate Raymond in New York; Editing by Jeffrey Benkoe and W Simon)