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Argentina pays down much of its debt as US judge drops orders

Published 22/04/2016

The long stand-off between Buenos Aires and investors occurred after Argentina defaulted in 2001 on 100 billion dollars of debt with bondholders
The long stand-off between Buenos Aires and investors occurred after Argentina defaulted in 2001 on 100 billion dollars of debt with bondholders

A New York judge whose orders have blocked Argentina from operating normally in financial markets has vacated his rulings after the republic paid billions of US dollars to foreign creditors.

US District Judge Thomas P Griesa got the "greatest pleasure" in lifting his orders after the South American nation lived up to its promises, mediator Daniel Pollack said in a statement.

Mr Pollack, a New York lawyer who was appointed by Judge Griesa last year, has negotiated more than 8 billion dollars in settlements between Argentina and bondholders since January.

He said the judge does not speak publicly except through his court actions but had told him to make public his happiness with the changed circumstances.

"Judge Griesa has expressed to me that he is very gratified by this momentous development in the 15-year litigation over which he has presided," Mr Pollack said.

The lifting of the orders came after Argentina notified the judge that it had fulfilled its promises to all bondholders who had reached deals with it by February 29. A majority of the nearly 10 billion dollars owed to creditors had been settled by that date. Mr Pollack said billions of dollars were paid to bondholders on Friday.

The long stand-off between Buenos Aires and mostly foreign investors, including US hedge funds, occurred after Argentina defaulted in 2001 on 100 billion dollars of debt with bondholders.

Many foreign bondholders went to court rather than trade their bonds for something worth between 25% and 29% of their original value. The less valuable bonds were accepted by 93% of Argentina's bondholders, leading some to characterise the US hedge funds as "vultures".

Judge Griesa issued orders blocking Argentina from paying the bondholders, who accepted the discounted bonds through US financial institutions, unless bondholders who did not trade their bonds were paid as well, effectively crippling the country's ability to manoeuvre through world financial markets.

Lawyers for bondholders who carry bonds worth less than 2 billion dollars had tried to delay expiration of the orders on the grounds that Argentina would stop negotiating. A federal appeals court rejected the argument recently and Mr Pollack said settlements continue to be made.

Earlier this week, Argentina's economy minister Alfonso Prat-Gay said his country's unusually high inflation rate is expected to be helped by the payments to bondholders and Argentina's successful return to global credit markets, where it received robust demand for a 16.5 billion dollar bond offering announced on Tuesday.

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