Argentina reaches settlement with Hedge Funds

Argentina has reached an agreement with some of its creditors that should help end the 15 year long dispute that banned the country from the international fixed income markets.

When Argentina defaulted in 2001, some holders of bonds that were restructured have not agreed to the terms offered by the Argentinean government. Led by Paul Singer’s Elliott Management, the group of investors still holding the original bond contracts took the country’s government to the US federal court and insisted on payment according to the original terms. 

To force Argentina to do so, U.S. District Judge Thomas Greisa issued an injunction barring Argentina from making payments on other bonds without paying the holdout investors too. The country went into default again in 2014, as no payments on any of its bonds could be made due to the judge’s order. 

After elections in November and the Mauricio Macri being the new president of Argentina, the Argentinean government’s position went from the offensive to settling with the holdouts. The deal, that still requires approval from Argentina’s Congress, pays about 75% of what the hedge funds claimed to be owed. In total $4.653 billion.

Still, the deal does not settle the dispute completely, as some smaller holdout investors still refuse the terms. But because they lack the resources of the larger hedge funds, they are a minor thread to the Argentinean government. The country is acting in the global bond market again, after Judge Greisa lifted the injunction that blocked the courtly from paying its creditors in February.