Nelson Mandela: A life in pictures
Nelson Mandela and his wife Winnie in this undated file picture.
NEW YORK (AP) — Argentina got some breathing room Wednesday in its billion-dollar debt showdown as an appeals court indefinitely suspended a federal judge’s ruling that threatened to push the country into default.
The two-paragraph appellate court order sets a Feb. 27 date for oral arguments in the case, averting a Dec. 15 deadline for a $1.3 billion payment that Argentina has refused to make despite losing its case against NML Capital Ltd., an investment fund that specializes in suing over unpaid sovereign debts.
Judge Thomas Griesa had ordered the government of President Cristina Fernandez to pay the money into an escrow account even as it pursued its final appeals. The 2nd U.S. Circuit Court of Appeals stayed that order, giving all parties in the case two more months to prepare for hearings.
Fernandez called the ruling by Griesa “judicial colonialism” and said she won’t pay anything to what she calls “vulture funds.” She said that if it was allowed to stand, the judge’s ruling would give financial speculators a huge advantage over countries that need to restructure debts and protect their citizens as they grow their way out of economic crises.
Griesa’s order threatened to set off a crisis as lawyers representing other holders of defaulted debt, totaling more than $11 billion, were expected to demand immediate payment as well.
His ruling in favor of a fund run by billionaire Paul Singer and other plaintiffs was issued just before the long Thanksgiving weekend, and the consequences for Argentina since then have been severe.
The cost of maintaining Argentina’s overall debt soared in trading on U.S. and European bond markets, and the cost of insuring the debts through credit default swaps spiked. Fitch’s Ratings Service downgraded Argentine bonds, already considered junk, to one step above default, predicting the government won’t pay. Those and other reactions made borrowing even more expensive for any company operating in Argentina, and analysts were predicting more social upheaval as credit dries up and the country’s recession deepens.
Fernandez said the ruling was particularly unfair since Singer and other holdouts refused two opportunities to swap the debt left over from Argentina’s world record 2001 default with new bonds, which the government has reliably paid since 2005.
Bondholders who accepted the swaps got less than 30 cents for the nominal dollar value of the original debt, representing a huge relief package that has enabled Argentina to quickly grow its way out of an abysmal crisis that left half the population in poverty.
Argentina has the goodwill to keep its promises to these restructured bondholders, Fernandez told Argentine executives during a joint appearance with Brazilian President Dilma Rousseff. “We’re going to honor our commitment, as a country that has recovered its self-esteem,” she said to heavy applause.
Under the judge’s orders, if Argentina keeps refusing to pay the plaintiffs, however, the Bank of New York would be required to stop any cash Argentina sends to the 93 percent of bondholders that accepted the swaps.
Those so-called exchange bondholders also appealed and asked for the stay, saying the judge’s remedy could push Argentina into unwillingly defaulting on more than $20 billion that Argentina has been paying in regular installments.
While hoping for the stay, Economy Minister Hernan Lorenzino said earlier Wednesday that the government was considering asking Argentina’s congress to reopen the 2005 and 2010 debt exchanges, but only to offer the holdouts yet another opportunity to accept the same steep “haircuts.”
That’s a more flexible position than Argentina has shown in years, but hardly enough to satisfy the plaintiffs now that the judge has ordered them to be paid 100 percent plus interest for the debt that many of them bought for pennies on the dollar in 2002, when Argentina’s economy was in ruins.
Clauses in these bond contracts say that everything Argentina owes could come due immediately, and in full, if the government “voluntarily” changes the terms of its debt restructurings, so Lorenzino stressed Wednesday that Argentina won’t make any move without a definitive order from the U.S. courts.
Griesa said the Argentine president’s own rhetoric forced him give the government as little time to maneuver as possible. He essentially gave Fernandez several painful choices: Eat her words and pay $1.3 billion to the plaintiffs, which in turn would set a precedent enabling other holdouts carrying more than $11 billion in defaulted debt to demand similar payments in full. Or keep refusing to pay, prompting a default with the other bondholders that would make more than $20 billion come immediately due.
Argentina has more than $45 billion in foreign currency reserves, but that money is committed to a slew of government subsidies and economic stimulation programs.
Associated Press writers Larry Neumeister reported this story in New York and Michael Warren reported from Buenos Aires.
Nelson Mandela and his wife Winnie in this undated file picture.
Mandela is accompanied by his former wife Winnie, moments after his release from prison February 11, 1990 after serving 27 years in jail. (Reuters)
In this February, 1990 photo, shortly after his release from 27 years in prison, Nelson Mandela, gives the black power salute to the 120,000 supporters packing Soccer City stadium in Soweto, near Johannesburg. (AP Photo)
Nelson Mandela showed his passport in February 19, 1990, shortly after his release from prison. The South African government authorized an application for himself and his wife Winnie - (Juda Ngwenya / Reuters)
In this July 27, 1991 photo, Cuban President Fidel Castro, and Nelson Mandela gesture during the celebration of the "Day of the Revolution" in Matanzas, Cuba. (AP Photo)
In this July 4, 1993 photo, President Bill Clinton and Nelson Mandela listen during Fourth of July ceremonies in Philadelphia during which Clinton presented the Philadelphia Liberty Medal to the African National Congress president and South African President F.W. de Klerk. (AP Photo/Greg Gibson)
President of the African National Congress Nelson Mandela acknowledges cheers from the crowd as he prepares to unveil the ANC's official election platform in 1994. (AP Photo/David Brauchli)
African National Congress (ANC) leader Nelson Mandela greeted residents of Mmabatho in March 1994, during a visit after the nominal homeland came under South African control following the ousting of the former President Lucas Mangope. (Reuters/Howard Burditt)
South African President Nelson Mandela smiles with actor Sidney Poitier at a press conference in Cape Town in 1996. Poitier played Mandela in the film "One Man, One Vote" (AP Photo / Sasa Kralj)
South African President Nelson Mandela waves to crowds as he sits next to Queen Elizabeth II in a an open carriage on the way to Buckingham Palace.(AP/Louisa Buller)
Chairman of the Constitutional Assembly Cyril Ramaphosa, left, holds up a copy of the country's constitution which was signed by President Nelson Mandela, in December 1996. (AP Photo / Adil Bradlow / POOL)
Nelson Mandela at a news conference in Johannesburg in February 2000. (AP Photo / Denis Farrell)
South African rugby captain Francois Pienaar, right, received the Rugby World Cup trophy from President Nelson Mandela also wearing a South African rugby shirt, after South Africa defeated New Zealand in the Rugby World Cup , in 1995. (AP Photo / Ross Setford)