Argentina’s Last Gasp of Deception Before Its Default

The court directs that, among the terms specified, Argentina indicate: (1) how and when it proposes to make current those debt obligations on the original bonds that have gone unpaid over the last 11 years; (2) the rate at which it proposes to repay debt obligations on the original bonds going forward; and (3) what assurances, if any, it can provide that the official government action necessary to implement its proposal will be taken, and the timetable for such action. 

Should a response be sought from any other party to Argentina’s submission, a further order will issue from the court.

In the past month commentators and legal experts have been vigorously discussing the possible terms of Argentina’s payment plain. I agree with the general consensus that the Court is looking for a direct, precise and uncomplicated payment scheme to cancel the outstanding judgments. The appellate judges have graciously given the sovereign appellate a last opportunity to avoid an embarrassing court order payment scheme. In essence the Court is asking Argentina to prepare a consent order that it will abide by.

According to analyst Josh Rosner, Managing Director of Graham Fisher and Co. of New York “the court was looking for something simple, like: we’re not going to pay them in a lump sum, but we’re going to make a quarterly payment of the full $1.4 billion over three years. They weren’t looking for creative financing where Argentina demands or forces a new bond…What if somebody took that new bond, and the Argentine government defaulted the next day?” I agree with Rosner; the Court wants all the litigation to end by the plaintiffs being paid in full.

Just hours before the March 27, 2013 midnight filing deadline the Court received Argentina’s payment plan. I have not yet seen the actual filing but its terms have already been widely discussed. According to the title of an article in the USA Today reporting on the plan it is clear that “Argentina wants to pay its debts with cash and


U.S. Court of Appeals 2nd Cir.

bonds.” Some of the bonds that are being offered would not become fully due in 25 years. The plaintiffs are owed monies due from before the Republic’s default and after. Clearly the judgment creditors want to cut their legal ties with Argentina by receiving full payment in cash. The idea of holding more of the Republic’s debt for even a day is not appealing the plaintiffs. Instead of proposing a straight out payment plan of cash over time the Argentine government hopes the Court will force a restructuring of the plaintiffs’ debt. From the language in the order this is something the Court will not consider doing. The Court is certainly aware that a few years ago Argentina offered a very similar settlement plan that was rejected by the plaintiffs.

I think the Court will dismiss Argentina’s payment plan as being inconsistent with the prior courts’ orders. In the end the appellate judge’s will reaffirm the lower court’s forced payment scheme. The South American Republic has placed politics over economics and that strategy will lead to another massive default. Afterwards the President Fernandez and her administration will blame the American judiciary for its new predicament.

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