NEW YORK, N.Y. – Argentina paid creditors on Friday who had refused debt restructurings after its record default, ending a long-standing legal dispute that returns the South American country to international credit markets after nearly 15 years.
A Manhattan judge whose orders have blocked Argentina from operating normally in financial markets vacated his rulings Friday after the country paid billions of dollars to foreign creditors. U.S. District Judge Thomas P. Griesa got the “greatest pleasure” lifting his orders after Argentina lived up to its promises, mediator Daniel Pollack said in a statement.
Pollack, a New York lawyer who was appointed by Griesa last year, negotiated over $8 billion in settlements between Argentina and bondholders since January. Pollack said the judge does not speak publically except through his court actions but had told him to make public his happiness with the changed circumstances.
“Judge Griesa has expressed to me that he is very gratified by this momentous development in the 15-year litigation over which he has presided,” Pollack said.
“Injunction lifted. No more chains. No more clamps. #CiaoDefault,” Argentine Economy Minister Alfonso Prat-Gay wrote on Twitter. “A new era is beginning. Argentines are ready to start growing.”
The lifting of the orders came after Argentina notified the judge Friday that it had fulfilled its promises to all bondholders who had reached deals with it by Feb. 29. A majority of the nearly $10 billion owed to creditors had been settled by that date. Pollack said billions of dollars were paid to bondholders Friday.
The long standoff between Argentina and mostly foreign investors, including U.S. hedge funds, occurred after Argentina suffered its worst economic crisis in 2001 and defaulted on a record $100 billion of debt with bondholders.
Many foreign bondholders went to court rather than trade their bonds for bonds worth between 25 per cent and 29 per cent of their original value. The less valuable bonds were accepted by 93 per cent of Argentina’s bondholders, leading some to characterize the U.S. hedge funds, who refused debt restructurings as “vultures” picking on the carcass of Argentina’s crisis.
The holdouts spent more than a decade litigating for payment in full rather than agreeing to provide Argentina with debt relief. They also sent lawyers around the world trying to force Argentina to pay its defaulted debts and were even able to get a court in Ghana to temporarily seize an Argentine naval training ship.
Griesa issued orders blocking Argentina from paying the bondholders, who accepted the discounted bonds through U.S. financial institutions, unless bondholders who did not trade their bonds were paid as well. Those orders effectively crippled the country’s ability to manoeuvr through world financial markets, forcing Argentina to issue domestic bonds to raise funds and to search for backdoor financing from countries like China. The long, costly fight led to changes in how debt is issued worldwide. Many countries have restructured contracts in attempts to avoid getting into similar situation.
Lawyers for bondholders who carry bonds worth less than $2 billion had tried to delay expiration of the orders on the grounds that Argentina would stop negotiating. A federal appeals court rejected the argument recently and Pollack said settlements continue to be made.
Former Argentine President Cristina Fernandez had refused to negotiate with the creditors casting the fight as a U.S. court trying to bully a sovereign nation. But President Mauricio Macri campaigned last year on promises to end the dispute and attract foreign investment to the continent’s second-largest economy.
A recent repayment deal finally broke an impasse that had kept Argentina on the margins of international credit markets, forcing it to print more money that stoked one of the world’s highest inflation rates.
Earlier this week, Prat-Gay said that Argentina’s high inflation rate is expected to be helped by the payments to bondholders and the country’s triumphant return to global credit markets, where it recently received robust demand for a $16.5 billion bond offering.
Henao reported from Buenos Aires, Argentina.