Rather than comply with Friday’s unanimous ruling ordering her government to pay $1.4 billion in cash to a group of plaintiffs she calls “vulture funds,” President Cristina Fernandez is proposing another debt swap: offering new bonds to be paid in dollars in Buenos Aires to anyone still holding defaulted debt.
Where I come from, we might call that “throwing good money after bad”, but it’s more a case of stiffing the creditors.
The way the bonds in question were written, holders must be paid 100% of the nearly $1.33 billion they are owed in principal and accrued interest.
Though 93% of bondholders eventually accepted Argentina’s terms, others, such as the group of holdouts who were favored in last week’s decision, held out hope for a better offer.
The offer never came, and Mrs. Kirchner indicated Monday that her government wouldn’t comply with the court order, even if it is upheld by the U.S. Supreme Court.
The move to reopen the debt-restructuring process for a second time appears aimed at ensuring that Argentine payments to overseas bondholders don’t get embargoed by the U.S. court.
Argentina will invite investors holding foreign-law bonds to swap them for new debt that would be paid under local legislation in Argentina.
And that will get your debt paid with more debt.