Argentina’s Legal Troubles Deepen

Argentina’s Legal Troubles Deepen

Post date : 06.10.2015 10:16 am

Will Rogers once said, “If you find yourself in a hole, stop digging.”  Argentina’s government can’t seem to stop clawing its way deeper. On Friday, the U.S. District Court ruled in favor of hundreds of creditors known as the “me toos.”  The “me toos” collectively hold more than $5.5 billion of New York law bonds that Argentina defaulted on in 2001. Earlier this year – after the RUFO clause expired and it became apparent that Argentina’s use of the RUFO clause as an excuse not to negotiate was a sham all along – the “me toos” sought to enforce their pari passu rights.  On Friday, the court agreed that Argentina violated their pari passu rights. (The same court had previously ruled in 2012 that holders of $1.3 billion of similar New York law bonds were entitled to enforce their pari passu rights against Argentina.) The original pari passu plaintiffs and the “me toos” comprise the vast majority of New York law bondholders remaining since the 2001 default.

Importantly, Friday’s ruling did not increase the amount that Argentina owes to its New York law bondholders.  The “me toos” had already received money judgments from the U.S. court based on the full amount of their claim prior to Friday’s ruling.  Friday’s ruling merely confirmed that the “me toos” are also able to enforce their pari passu rights.

Not surprisingly, Argentina’s Economy Ministry immediately trashed the ruling, calling it “blackmail,” an “illegal decision” and “impossible” to comply with.  This is petulant and counterproductive.   It’s time for Argentina’s leaders to stop digging, and to get out of the hole they’ve made for themselves by choosing to default last summer and refusing to negotiate with creditors. Argentina’s management of its debt situation has been completely irresponsible, and this latest ruling illustrates just how irresponsible it is.  Argentina complained incessantly about the original pari passu ruling. And yet it did nothing to negotiate a settlement. Instead, it sat on its hands waiting for hundreds of more creditors to get pari passu status. Argentina may continue to complain, but it has no one but itself to blame.