The long-simmering battle for billions of dollars in Argentina debt payments has begun to boil.
A Manhattan federal judge last week refused a request by hedge fund investor Paul Singer to chide Argentina over its apparent “best option” plan to default on all its debt should it lose its last-chance appeal later this week.
Singer was enraged by a leaked confidential memo written by the country’s lawyers at Cleary Gottlieb that indicated Argentina was considering defaulting on all of its debt should the Supreme Court decline a request to hear the case.
Judge Thomas Griesa had ordered Argentina to pay all bondholders — including holdouts like Singer — if it made its scheduled payments to those bondholders that agreed years ago to a severe haircut in a debt restructuring.
Lawyers for Singer’s Elliott Management called the memo a “smoking gun” that proved Argentina was preparing to disobey the court’s order to pay up.
Griesa, in refusing to scold Argentina, said the memo was a privileged document between Argentina and its lawyers.
The judge then forced Singer to redact all mention of the memo in court documents and letters.
Griesa in the past backed Singer and similar holdouts — who didn’t agree to the restructuring — saying the South American country must pay them $1.4 billion if and when it makes a payment on its restructured debt.
An appellate court upheld Griesa’s decision.
Argentina took the case to the high court, saying it can’t afford to pay, as other holdouts would demand payment and take more than half of its foreign currency reserves of $28 billion.
The court will meet to consider Argentina’s request June 12. A decision will likely be made public by June 16.
If the court turns Argentina down, the “best option” would be to “default and then immediately restructure all of the external bonds so that the payment mechanism and the other related elements are outside of the reach of American courts,” according to the memo, which was published on an Argentina news website.