Argentina’s Debt Conundrum
The recent ruling by a US federal judge ordering Argentina to pay its holdout bondholders presents its government with a political, economic, and legal dilemma. Unless Argentina puts forward an alternative payment proposal, the US Court of Appeals will have to choose between the holdouts’ “all” and Argentina’s “nothing.”
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BUENOS AIRES – Argentina is in a quandary. Prior to its 2005 sovereign-debt exchange, its legislature enacted a “lock law,” which barred the way to any future offers to holders of bonds on which Argentina defaulted in 2002. While the lock law helped to boost the participation rate in the 2005 exchange, holdout creditors remained, and have pursued litigation to force repayment.