In a brash slap at the US, Argentina said yesterday it has no intention of obeying any federal appeals court order to pay $1.44 billion to a group of US holdout bondholders.
“We are representing a government, and governments will not be told to do things that fundamentally violate their principles,” Jonathan Blackman, a lawyer for the deadbeat South American country, told a Manhattan US appeals court.
“So the answer is you will not obey any order but the one you propose?” Judge Reena Raggi asked.
“We would not voluntarily obey such an order,” replied Blackman — who later said Argentina would be no more likely to obey a US court than the US would be to obey an Iranian court.
The high-stakes legal showdown came during a sometimes-tense two-hour hearing in which a group of holdout bondholders — led by Paul Singer’s Elliott Management — asked the appeals court to uphold a lower-court ruling that held they were due the payout and laid out a clear payment plan.
The appeals court agreed that Elliott’s group was entitled to its payout but said it would review how the payment would be carried out.
A pro-Elliott ruling would force Argentina to pay the holdouts $1.44 billion the next time it makes a payment to a larger group of so-called exchange bondholders.
The larger group agreed to an Argentine debt restructuring years ago.
The Elliott group and others, who did not agree to the bond haircut, have received judgments against Argentina totaling about $10 billion.
Elliott has been fighting in the courts for years to get its money and came up with the payment plan that the lower court endorsed last year. Argentina claims it doesn’t have the money to pay off the Elliott group.
The exchange bondholders fear a pro-Elliott ruling could lead Argentina to default on all the bonds.
The markets seemed to agree. As the hearing was drawing to an end, the spread on the credit-default swaps to protect Argentine debt widened 65 basis points to 2,342, the highest in the world, according to Bloomberg data.
The much-watched case drew a crowd of close to 300 people to the hearing in downtown Manhattan, necessitating the use of two rooms to handle the overflow.
In the courtroom were Hernan Lorenzino, Argentina’s minister of economy, and Amado Boudou, the country’s vice president.
“This is not the end. The order you affirm will not end it,” Blackman said, perhaps sensing that the hearing was going against his client.
A decision is expected within several weeks.