The U.S. Supreme Court left intact rulings that might force Argentina to pay billions of dollars to holders of repudiated bonds, rejecting the country's appeal in a case that has unsettled its financial markets and triggered threats of a new default.
The justices without comment Monday turned away contentions that lower court rulings misread Argentina's bond agreements and violated its sovereign immunity. The rebuff is a victory for investors, led by a Paul Singer-controlled hedge fund, who have refused to exchange their defaulted bonds for about 30 cents on the dollar.
The rejection leaves Argentina facing a court order to pay the holdouts in full before it makes payments on a separate $24 billion in restructured debt. The country could try to negotiate a settlement, a step it so far has refused to take. Officials say the country can't afford to pay both sets of bondholders.
“Compliance will force the country to face a serious and imminent risk of default, with grave ramifications for Argentina, the exchange bondholders, and the capital markets,” the country said in a May 27 court filing.
The legal fight has put U.S. courts in the unusual position of shaping another country's financial future. Lower court rulings have led Standard & Poor's, Fitch Ratings and Moody's Investors Service to lower Argentina's bond ratings.
The dispute revolves around Argentina's 2001 default on a record $95 billion in debt. The country offered to substitute lower-value bonds in 2005 and made a similar proposal in 2010. Owners tendered about 92% of the outstanding debt.
A default could occur as soon as June 30, when Argentina's next coupon payment on $13 billion is due. According to a memo leaked to an Argentine website last month, the country's attorneys recommended a default and immediate restructuring in the event the Supreme Court rejected the appeal.
