Argentina debt holdouts seek to broaden scope of court injunction

Argentina debt holdouts on Monday asked a U.S. court to make more of the country's debt, including bonds issued last month, subject to a prior court order blocking the country from making payments on its obligations without paying the holdouts as well.

Aurelius Capital Management, one of the lead holdout investors in defaulted Argentina sovereign debt, wants its prior victory in U.S. District Court on the principal of pari passu, or equal treatment, extended to all of Argentina's external indebtedness.

At issue is the treatment of Argentina's BONAR bonds, which are denominated in U.S. dollars but governed by local law. The government issued $1.4 billion in BONAR 2024 bonds last month in order to raise desperately needed capital.

Deutsche Bank (DBKGn.DE) was identified as the principal manager of the April debt offering, according to Aurelius's court filing.

The asset manager and other holdouts contend the government is issuing this kind of debt to get around the order, which entitles the holdouts to be paid for the defaulted bonds they hold.

"Argentina's BONAR 2024 Bonds and its other External Indebtedness also are subject to the Equal Treatment Provision, and Argentina can present no reason why it should be allowed to issue more of these bonds and make payments on these bonds without making a ratable payment under Plaintiffs' bonds," Aurelius said in its filing.

Aurelius Chairman Mark Brodsky said in a statement emailed to media organizations that Argentine Economy Minister Axel Kicillof's bragging that Argentina's BONAR 2024 issuance was international proves the point that the government is thumbing its nose at the U.S. courts.

"Mr. Kicillof likes to brag that the recent BONAR 24 offering was international. We agree. That makes those bonds subject to our pari passu covenant. The hedge funds that piled into these richly priced bonds did so with eyes wide open," said Brodsky.

A spokeswoman for Argentina's Economy Ministry declined to comment.

NML Capital, another lead holdout creditor, filed a similar motion saying that Argentina still refuses to negotiate a settlement even after the expiration of the so-called RUFO clause (Rights Upon Future Offers), which Buenos Aires claimed limited their ability to offer better terms to holdouts than what was agreed with other bondholders.

"By now, it is clear that the Republic is engaged in a systematic effort to evade U.S. court orders indefinitely," and that holdouts deserve additional relief, an NML spokesman said in a statement emailed to media.

"NML will continue to enforce its rights against the Republic and any third party that assists the Republic in its violations."

Tags

Aurelius Capital Management, Argentina, BONAR, RUFO

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