NEW YORK/BUENOS AIRES: Argentina’s default this week did not “extinguish or reduce” the South American country’s debt obligations, a US judge said yesterday, and he ordered negotiations between the country and holdout investors to continue.
In a stern tone, US District Judge Thomas Griesa in New York criticised the decision by Latin America’s No. 3 economy to default on $29bn in debt earlier in the week rather than pay the holdouts as ordered.
As Griesa was speaking, a committee facilitated by the International Swaps and Derivatives Association (ISDA) declared Argentina’s failure to pay an interest payment a “credit event.”
The move triggers payment on insurance held on Argentine government debt, which analysts estimate could amount to roughly $1bn. Griesa chided Argentina for making statements only about its obligations to bondholders who took large writedowns after its $100bn default in 2002, and not the rights of the New York hedge funds at the centre of the dispute, which had rejected the bond swaps. “What occurred this week did not extinguish or reduce the obligations of the Republic of Argentina,” Griesa told a court hearing.
The federal judge said both parties had an “obligation” to continue cooperating with court-appointed mediator Daniel Pollack. The Buenos Aires government on Thursday called Pollack “incompetent.”
Argentine bond prices, which earlier had extended Thursday’s losses before holding steady, were largely unmoved by Griesa’s comments. The Argentine government maintains it has not defaulted because it made a required interest payment to a bank intermediary on one of its bonds. But Griesa blocked that deposit in June, saying it violated his ruling that Argentina settle its dispute with holdout investors first. As a result, holders of $29bn in Argentine bonds did not receive the interest coupon payment by a July 30 deadline.
Before the hearing, Argentina’s government had said it expected nothing favourable to come from Griesa, who it has previously called an “agent” of the New York hedge funds.
“We can’t hold any positive expectations because (Judge Griesa) has always held the view of someone who is partial,” Cabinet chief Jorge Capitanich told reporters in Buenos Aires.
Argentina had argued it needed to await the December 31 expiration of a legal clause barring it from paying under better terms to the holdouts than those accepted by restructured debt holders before changing its negotiating terms.