Argentina wins debt reprieve

On Wednesday, New York's Second Circuit Court of Appeals placed a stay on a lower court's order that Argentina must pay $1.3 billion (1 billion euros) in long-defaulted bonds to a group of US hedge funds, including NML Capital, Elliot Management and Aurelius Capital Management.

The payment was due on December 15, and if not made by the debt-laden South American country, would have driven Argentina into technical default.

In 2001, Argentina defaulted on government bonds worth about $100 billion. Under a 2005 debt swap deal, most creditors agreed to exchange those bonds with new government debt worth 70 percent less. However, the US hedge funds have held out, pressing their claims for full repayment in a New York district court.

"We do not think it is right or legitimate to pay to vulture funds," Argentina's Economics Minister Hernan Lorenzino said last week, following the ruling by the court which ordered that the hedge funds must be paid "before or in parallel" with other creditors.

With that ruling now set on stay by the appeals court, Argentina is able to repay around $3 billion to exchange bondholders due in December. The appeals court said it would hear oral arguments on the case on February 27, 2013.

On Tuesday, ratings agency Fitch cut Argentina's creditworthiness by five notches to CC, saying it expected the country to default if the hedge funds were to finally succeed.

Uhe/mz (AFP, dpa, Reuters)