By Charles Newbery
BUENOS AIRES
A contempt ruling against Argentina by a U.S. judge about defaulted bonds goes against international law, Argentina said Monday.
The ruling violates the charters of the United Nations and the Organization of American States, Argentine Foreign Minister Hector Timerman said in a statement.
“It has no practical effect,” he said.
It is the latest episode in a fight creditors have been waging against Argentina since shortly after the country defaulted on $100 billion in bonds in 2001, at the time the largest sovereign default in history.
While the country restructured 92.4 percent of the bonds at 30 cents on the dollar in 2005 and 2010, the rest of the creditors held out to use legal channels to collect full repayment.
Of these, the first to win a lawsuit stands to collect $1.5 billion on the investment in the defaulted bonds for a profit of more than 1,600 percent, according to Argentina’s calculations.
Latin America’s third-largest economy has refused to pay these creditors, among them New York billionaire Paul Singer, any more than the 92.4 percent. Such a payment, given the rise in the values of the bonds over the years, will fetch the so-called holdout creditors a healthy profit of 300 percent, Economy Minister Axel Kicillof has said.
The plaintiff creditors, however, have refused, and they sought the contempt ruling from U.S. District Judge Thomas Griesa, who is hearing the case in New York.
On Monday, Griesa based his decision on moves by Argentina to evade his order to pay the plaintiffs.
His order requires the country to pay the plaintiffs at the same time it makes any payment on U.S.-law bonds, based on an equal treatment of creditors clause in the defaulted bonds.
That led the country to default on $539 million in bonds in July, and could push it to a new default on $200 billion Tuesday.
The government says it cannot pay more to the plaintiffs without exposing the country to claims of more than $120 billion from the restructured bondholders, based on a “me too” clause that allows them to collect anything better offered to the holdouts.
To get around Griesa’s order so it can continue to service its restructured bonds, President Cristina Fernandez de Kirchner pushed through Congress a bill allowing her government to offer holders of restructured U.S.-law bonds to swap the jurisdiction and paying agent to Argentina.
That means that Griesa would no longer have jurisdiction on the bonds, allowing the country to resume repayments.
While the Argentine Congress has approved the bond swap, it has yet to be offered to creditors.
But Griesa declared the move as an “illegal” step to evading his orders that he warned cannot be carried out.
This is not the first time that Griesa has warned that such a bond swap would be illegal, raising questions of what could come next.
The plaintiff creditors asked Griesa to impose a $50,000 per day fine on the country until it pays what is owed them, however, Griesa did not issue a decision on the possibility of a fine.
Before the ruling, Timerman sent a letter to U.S. Secretary of State John Kerry to say that a contempt decision would “threaten the dignity and sovereignty” of Argentina, and lead to “an unprecedented escalation of the conflict.”
The letter added that the U.S. government “has to answer” for the actions taken by its judiciary, which Argentina said it considers “an unlawful interference in the domestic affairs” of the country.
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