The suspense continues: silence from the US Supreme court on Tuesday on what is to be done about Argentina, after it appealed a lower court ruling in favour of “vulture funds” that refused to accept the terms of debt restructurings after its 2002 default.
Although there was a chance that the court could have taken up Argentina’s case on Tuesday when it announced the list of cases it will hear when its new term starts on October 7, no one seriously thought they would. Argentine debt prices barely budged on the news.
It’s more likely that something will happen on October 7, when the Supreme Court could either reject Argentina’s petition outright, or it could ask the Solicitor General for advice as to whether the case merits its attention – that could take as long as three months.
It’s also possible that there will be no decision announced next Monday either, and that Argentina gets a second chance to file a petition when a related case pending in a New York federal appeals court is finalised.
The New York court ruled in August that Argentina must pay $1.33bn to the so-called holdouts, although the decision was stayed pending review by the Supreme Court.
The longer this goes on for, the better for Argentina. But sooner or later – and now that it’s all been going on for more than a decade it is going to be sooner rather than later – Argentina will run out of legal delaying tactics. It will be forced to pay up. Most likely, Argentina will refuse, and that will trigger a technical default.
So what, you may ask? It’ll just be one more stripe on the tiger, say some. Argentina is already paying default interest rates on its debt.
True, say others, but it’s not just about the sovereign – there will be a negative impact for the private sector too, especially companies seeking export credits. If they dry up, that would affect the broader economy.
Either way, it would close a dark chapter in Argentina’s economic history that has been dragging on for far too long.
Argentina loses appeal of ruling forcing it to pay bondholders, FT
Argentina joins the CCC+ club, beyondbrics
Argentina bonds: high yielding for a reason, beyondbrics
Pari passu saga, FT Alphaville