16 June 2014
Last updated at 19:06
The US Supreme Court has delivered a double blow to Argentina over its long-running battle with holders of the country’s defaulted bonds.
First, the court on Monday rejected Argentina’s appeal against an order to pay more than $1.3bn to hedge funds that hold some of the bonds.
Then, bondholders won the right to use US courts to force Argentina to reveal where it owns assets around the world.
The country’s main stock market tumbled more than 6% at the start of trading.
The court’s decision means that bondholders should find it easier to collect on their debts.
“This realistically is the end of the road for Argentina’s decade-long fight,” said Anna Gelpern, an expert in sovereign finance at the US-based Georgetown Law School.
The South American country defaulted in 2001 following its economic crisis, and has been in a legal battle with bondholders led by hedge funds NML and Aurelius Capital Management.
Argentina argues the funds bought most of the debt at a deep discount after the default, and has since tried to impede the country’s efforts to restructure.
Investors holding more than 92% of the defaulted debt agreed in 2005 and 2010 to write off two-thirds of their pre-crisis value, providing Argentina with time to re-build its economy.
But the hedge funds held out against the restructuring.
Sebastian Centurion, economist at ABC Exchange, told the Reuters news agency: “It’s a slap in the face. The truth is that this is surprising because it is giving a precedent for any ‘vulture fund’ to go against any country, so any country is vulnerable in a restructure, so this is bad news for other countries.”
Argentina has said that forcing it to pay the money demanded by the bondholders could threaten its economy.
Siobhan Morden, head of Latin American strategy at Jeffries, said she hoped there will be a willingness on both sides to negotiate a compromise.
In 2012, one of Argentina’s navy ships was impounded in Ghana after bondholders won a court order as part of the dispute. After several weeks, the ship returned home.