Argentina's Hedge-Fund Adversaries Aren't Ready to Give Up Fight

Congressional approval of Argentina’s landmark debt accords was supposed to be the last big hurdle for the country as it seeks to end its decade-long dispute with creditors. Not anymore.

That’s because new legal challenges from bondholders have now emerged as obstacles. Earlier this month, a group of investors holding defaulted Argentine bonds -- including four hedge funds that reached a historic $4.65 billion settlement last month -- filed court papers in their effort to reverse a judge’s decision that would allow the South American nation to pay its restructured debt and issue new bonds. On Friday, a separate group of creditors also asked a U.S. Appeals Court to overturn the ruling.

While bond investors and analysts still expect Argentina to overcome these snags, the wrangling shows that some creditors are still angling to secure better deals, according to Tim Samples, a professor of legal studies at the University of Georgia.

Paul Singer’s NML Capital is among the hedge-fund creditors arguing that U.S. District Judge Thomas Griesa was too quick to drop injunctions blocking Argentina from the debt market. On Wednesday, Argentina’s Congress began debating a bill that would approve the debt accords and allow the government to issue about $12 billion to finance the payouts.

“If there is anything that longtime NML observers have learned, it’s not to rule out the unexpected or the improbable, especially when it comes to this particular litigation,” Samples said. “If the order lifting the injunctions is overturned, I think this is going to be re-bargained.”

While Argentina’s bonds have continued to advance, they have underperformed emerging markets this month. The notes have returned 0.6 percent, versus an average gain of 2.6 percent for developing-nation bonds tracked by JPMorgan Chase & Co.

Argentina’s Congress is expected to vote on approving the accords by Thursday, according to senate officials. Lawmakers in the lower house have already sanctioned the accord with the holdouts and gave their permission to issue debt to finance the Payments . The bill requires that the injunctions against Argentina are lifted.

Griesa’s order and the settlements both depend on Argentina passing legislation that would allow the agreements and pay off all the bondholders that settled their claims by Feb. 29. Elliott and the other three lead hedge funds also negotiated provisions allowing them to back out of their agreements if Argentina doesn’t pay them by April 14. They’re worried that if they’re not paid before then, Griesa’s ruling will leave them without any Leverage once the injunctions are lifted.

A federal appeals court has scheduled a hearing for April 13, one day before the agreed deadline to pay the creditors.

If the court “doesn’t change the hearing to a week earlier, how will Argentina manage to pay the next day?” Alejandro Bueno, global head trader for BancTrust & Co., said by phone from Buenos Aires. “How do you issue a bond in 12 hours?”

In a separate complaint filed Friday, bondholders including Fore Research & Management LP and Varde Partners requested the injunctions against Argentina paying debt remain in place after the government said March 11 it wouldn’t honor agreements it had reached with them last month. In a filing, Argentina said those settlements were “mistakenly” submitted to the court in its list of creditor accords.

“There is no assurance of payment if and when the injunctions are lifted,” lawyers for those bondholders said in a filing Friday.

--With assistance from Bob Van Voris To contact the reporter on this story: Charlie Devereux in Buenos Aires at cdevereux3@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Michael Tsang at mtsang1@bloomberg.net, Lester Pimentel, Rita Nazareth

By: Charlie Devereux

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