Argentina’s 11-year legal battle to avoid paying billions of dollars to Paul Singer and other so-called “vultures” neared the endgame Monday, when the US Supreme Court denied its petition to hear the case.
The decision upset Argentine markets, but was a huge victory for the Elliott Management hedge fund founder, who is owed about $3 billion.
“America’s highest Court has spoken,” an Elliott spokesperson said in a statement. “Now it is time for Argentina to honor its commitments to its creditors, which would benefit both Argentina’s economy and its international standing.”
Singer could get an annualized 80 percent rate of return on the money at stake in this case alone — or 1,380 percent aggregate return — according to a letter Argentina sent to an appellate court last year.
At the other extreme, Argentina could default on more than $30 billion, which its lawyers at Cleary Gottlieb outlined in a private memo as a “best option,” should the petition be denied.
Fears of such an outcome sent Argentine bonds and stocks tumbling Monday, with the Argentina Merval Index falling more than 10 percent in Buenos Aires. Lower courts ruled that Elliott and allies should be paid about $1.4 billion if and when Argentina makes a payment to those who accepted bond restructurings in 2005 and 2010. The next payment is due June 30.
A defiant Argentina President Cristina Kirchner told her nation Monday evening, “[The country] will meet its obligations and it will not default on the renegotiated debt.”
Meaning paying the holders of the restructured notes, but not the “vultures.”
The lower-court rulings were stayed while Argentina’s petition was before the court, but lawyers for Singer filed papers after the high-court ruling saying the stay was lifted when the petition was denied.
Cleary’s likely next move is to ask the high court to rehear the case, which would have to be filed within 25 days. The process might buy time, but little else. Even though a petition for rehearing doesn’t automatically reinstate the stay, Argentina’s legal team is likely to go back into Manhattan federal court and ask that it be reinstated.
If the stay remains in place beyond the June 30 bond-payment deadline, Argentina will have until December before another bond payment of the restructured bondholders is due.
Argentina has said $15 billion in total bond payments would be affected, including $3 billion to Singer. It added that paying the entire amount would eat up more than half its dollar reserves.
Sources close to Elliot said the hedge fund is still open to negotiating with Argentina. And some Argentine investors think in the end, President Kirchner, despite her insistence that “vultures” like Singer will not be paid, will have to bend.
“Imagine the chaos in Argentina if the country defaulted,” said Diego Ferro, a partner at hedge fund Greylock Capital.
“What happened to the last president who defaulted? He left the country in a helicopter when he resigned because there were people protesting outside,” said Ferro, an Argentine native.