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Hold-out resolution nearing

U.S. Judge to Lift Injunction in Argentina Debt Dispute

Argentine congress must remove law preventing holdout creditors from getting paid more than 30 cents on dollar

A U.S. federal judge said he is prepared to lift an injunction that has prevented Argentina from returning to the international capital markets, paving the way for a potential settlement with bondholders who have battled Argentina for years.

The decision is welcome news for Argentina and President Mauricio Macri, who has made resolving the long-running dispute a priority. A group of U.S. bondholders, led by billionaire Paul Singer’s Elliott Management Corp., have been wrangling with Argentina over payment on its defaulted government debt.

Argentina has been effectively barred from raising money in the international bond markets since its default in 2001 on more than $80 billion in government bonds, the largest sovereign default at the time. The new administration views a global bond offering as crucial for raising capital to stimulate an economy mired in recession.

“The injunctions, once appropriate to address the Republic’s recalcitrance, can no longer be justified,” U.S. District Judge Thomas Griesa wrote Friday in his ruling.

A spokesman for Elliott declined to comment on the judge’s decision. A spokeswoman for Argentina’s finance ministry said the government would continue to seek agreements with more bondholders.

Judge Griesa’s move doesn’t guarantee a quick resolution to the long stalemate. The judge said he would lift the injunction if Argentina’s Congress removes a local law that prevents holdout creditors from getting paid more than the 30 cents on the dollar.

Mr. Macri is certain to encounter some opposition to changing the laws. His predecessor, Cristina Kirchner, had long opposed settling with the holdouts, calling them “vultures” and “financial terrorists.” Mrs. Kirchner retains a significant bloc of loyal supporters in Congress, many of whom have vowed to oppose a deal.

“To convince people and win over Congress, Macri’s government needs to show that it negotiated well, that it went to New York and fought for Argentina’s interest,” said Juan Cruz Díaz, managing director of Cefeidas, a risk advisory firm in Buenos Aires.

Some are cautiously optimistic. Mr. Macri, who took office on Dec. 10, has been meeting frequently with opposition politicians, key governors and leading legislators to build support for the deal in Congress.

“This is very, very important news,” said Miguel Kiguel, a former Argentine finance secretary. “I think Macri will have all the support he needs.”

A settlement could also face entanglements in the U.S. Legal experts who have followed the case closely say the decision is likely to lead to more litigation, with bondholders suing to block payment or appealing to a higher court.

There’s an enormous risk that the legal process will overtake what were very productive negotiations, which would be very unfortunate,” said Charles Blitzer, an economist and former senior IMF staffer, who has been involved in many sovereign-debt restructurings.

​Argentina requested the injunction be lifted after earlier this month offering to pay bondholders 72.5% of claims, or 150% of the principal of their bonds. Most of the creditors refused the offer, saying it unfairly rewarded some creditors over others. ​

In his decision, Judge Griesa said he “takes no position” on the reasonableness of Argentina’s offer. He said he is prepared to lift the injunction because he believes the nation has shown a “good-faith willingness to negotiate with the holdouts.”

Representatives from Argentina were in New York on Friday meeting with the lead bondholders in the case and sources close to the negotiations have said the two sides are still wrangling over the details of a proposed settlement.

Hundreds of creditors represented in dozens of lawsuits pleaded against lifting the injunction in court filings this week, and requests to present oral arguments before the judge were unanswered.



Any settlement would be a positive for Madalena, as it opens up the country further for foreign capital to move in.



Judge Deals Setback to Holdouts in Negotiations With Argentina

A federal judge presiding over a long-running battle between Argentina and a group of New York hedge funds said on Friday that he would lift an injunction that had locked Argentina out of international markets.

The ruling represents a sharp turnaround by Judge Thomas Griesa of the United States District Court in Manhattan, who had previously prevented Argentina from raising new money or paying its creditors before paying investors holding its defaulted debt.

These investors — known as holdouts — include a group of hedge funds led by NML Capital, a unit of the billionaire Paul E. Singer’s Elliott Management. They have battled with Argentina for more than a decade in a fight that stems from 2001, when the country defaulted on nearly $100 billion of debt.

Argentina later offered twice to restructure the bonds for new and cheaper ones, but the holdouts refused and won a series of victories in the United States courts in recent years. Friday’s ruling now weakens the hand of the holdouts in negotiating with Argentina.

In his ruling on Friday, Judge Griesa said he would drop the injunctions after Argentina repeals domestic laws that prevent the country from making payments to the holdouts and makes full payments to bondholders who settle with Argentina by Feb. 29.

The creditors and Argentina’s previous president, Cristina Fernández de Kirchner, reached an impasse after years of mudslinging and rulings that led the country to default on its debt again in 2014.

Ms. Fernández de Kirchner and her administration called the hedge funds “vultures” and “financial terrorists,” and went as far as denigrating Judge Griesa.

All those years, Argentina “never seriously pursued negotiations toward settlement,” Judge Griesa wrote in his ruling on Friday.

“All that has changed,” the judge added, referring to the newly elected president, Mauricio Macri, who has pledged to resolve the debt dispute as part of a bigger plan to overhaul Argentina’s economy.

In recent weeks, Mr. Macri’s administration has moved to settle with several other holdouts, striking a $1.35 billion settlement with a group of Italian investors, among several other deals. On Feb. 5, after a week of intense negotiations with the group of six holdout hedge funds, it offered to pay $6.5 billion in an effort to put the battle behind it.

Two hedge funds — Montreux Partners and Dart Management — accepted the proposal, which would amount to three-quarters of a $9 billion claim on defaulted bonds.

The four others funds, which include NML Capital and Aurelius Capital Management, a hedge fund run by the former Elliott trader Mark Brodsky, have continued to reject the proposal.

If the court were to refuse to vacate the injunctions now, “it would unfairly deny those plaintiffs the opportunities to resolve their disputes amicably with the Republic,” Judge Griesa wrote on Friday.

He added that “vacating the injunctions serves the public interest by encouraging settlement to resolve disputes generally — particularly such protracted ones — as well as the concern for finality in this particular litigation.”

The ruling is also conditioned on a federal appeals court giving Judge Griesa the green light to go ahead.

“To think that after all that Elliott’s been through, that they could be outfoxed at this late hour — incredible, Macri’s a genius,” said one hedge fund manager who has not been involved in the dispute, but has watched it closely and has investments in Argentina.

Aurelius declined to comment, as did a spokesman for NML Capital.

Argentina had hoped to get the injunctions vacated first, so it could raise new money to pay the settlements it is reaching. But referring to Judge Griesa’s decision that the government pay the bondholders as a condition for his lifting the injunctions thereafter, Yael Bialostozky, the chief spokeswoman for Argentina’s Finance Ministry, said: “There was no surprise here. We keep progressing to close out agreements with the greatest possible number of bondholders.”


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