The Argentine government said Wednesday that its refusal to repay a group of U.S. hedge funds that stand to profit on the country's defaulted debt was vindicated by the United Nations' support for a multilateral plan handling bond restructurings.
The lengthy legal battle between Argentina and the investment funds that snapped up its bonds on the cheap after its record 2002 default - and are suing for 10 cents on the dollar - led to the Buenos Aires government defaulting again in July.
Cabinet Chief Jorge Capitanich's comments came ahead of a vote in the lower house of Congress, which is likely to approve a draft law that remodels the country's debt to enable it to skirt U.S. court rulings in support of the hedge funds.
President Cristina Fernandez says her country is the victim of “vulture funds” that are prepared to wreck its finances in their pursuit of huge profits. She wants a global framework that would prevent a minority of investors from scuppering debt restructuring agreements.
Prompted by Argentina and its ally Bolivia, the U.N. General Assembly voted overwhelmingly in favor of such a convention.
“If 124 countries in the United Nations support the Republic of Argentina, it means that Argentina is right in its claims,” Capitanich told reporters in Buenos Aires.
The July default took place after a New York court barred Argentina from servicing debt that was restructured under U.S. law until the government settled with the distressed-debt experts who rejected the terms of bond swaps in 2005 and 2010.
When the Buenos Aires government deposited a $539 million coupon payment with a U.S. intermediary bank in June, U.S. District Judge Thomas Griesa blocked the payment.
Fernandez has accused Griesa of overstepping his bounds and interfering in Argentina's national sovereignty.
Her response, a bill that would allow the government to make its debt payments locally, or elsewhere beyond the reaches of Griesa's court, has sailed through Congress so far. The vote in the lower house later on Wednesday or early Thursday is the final step after the Senate already voted in favor.
Investors, however, are concerned about legal and logistical hurdles and have underscored the lack of financial incentive to participate.
The bill also pushes investors to move their Argentine debt from the United States to a new jurisdiction, either Argentina or France. But Economy Minister Axel Kicillof acknowledged on Tuesday that bondholders had little appetite for such a plan.
