Argentina has agreed to pay around $500 million to resolve debts resulting from its default in the opening years of the twenty-first century. According to five separate agreements, which were signed by the country and several European and U.S. corporations, the bondholders will write down around 25 percent of the total $677 million they are owed, and receive $500 million in new Argentinian bonds.
Argentina defaulted on most of its publicly held debt at the end of 2001. The total default amounted to $132 billion, and it has been the source of dispute between the country and many of its bondholders since. The $677 million debt that has been resolved today is just a tiny part of the debt that Argentina originally defaulted on.
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Argentine debt deal
The four corporations involved in this debt deal are Vivendi SA (EPA:VIV) (OTCMKTS:VIVHY), Blue Ridge Investments, a part of Bank of America Corp (NYSE:BAC), Azurix Corp, and CC-WB Holdings LLC. A government statement on the deal, which was picked up by Reuters, said, “The proposals consist of the cancellation of those claims exclusively with public debt, for amounts which represent…a significant discount on the requested sums and a reasonable period for repayment.”
The deal comes at a time of political and economic trouble in Argentina. The country is looking to receive credit from last resort lender The World Bank in order to shore up its poor financial situation. The country is also hoping that the executive power of the United States directs the Supreme Court to reopen a case that ordered the firm to pay $1.3 billion to bondholders.
The deal recalls the most famous dispute that Argentina has had with bondholders. Elliott Management has been embroiled in several legal disputes about the debt it says it is owed by the country. That dispute reached a height last year, when the hedge fund decided to have a court in Ghana order the confiscation of an Argentinian Naval vessel at port in the country.
Elliott Management and Argentina
Elliott Management is part of the group that won the Supreme Court case against Argentina. The fund, which is led by investor Paul Singer, has spent a good deal of money on lobbying and legal fees in order to get its money back from Argentina.
The Supreme Court case awaits verification from the President of the United States before it becomes iron clad. If that happens, Argentina may have to pay out to Elliott after all.