Setback for Argentina: loses appeal in London and must pay US$ 1.5 billion

The government of Argentina This Wednesday, it lost an appeal in London to annul a previous ruling that required it to pay 1.3 billion euros (about US$ 1.5 billion) plus interest to four investment funds for debt bonds linked to the growth of its gross domestic product (GDP). .

The London Court of Appeal supported a ruling issued in 2023 that accepted the interpretation that investors make of the contract signed between the parties regarding how the evolution of GDP should be calculated.

The funds, which own around 48% of the securities issued by Buenos Aires between 2005 and 2010, initially sued Argentina in 2019 to demand payment of the debt, which the Argentine Government resorted to due to the difficult economic situation facing the country. .

In his April 2023 ruling, Judge Simon Picken urged Argentina to pay the amount due with an added interest of 2% above the Euribor index since December 2014, to the funds Palladian Partners, HBK Master Fund, Hirsh Group and Virtual Emerald International Limited.

The claim refers to bonds denominated in euros, with a clause that links them to British jurisdiction, issued by Argentina in 2005 and 2010, in the context of the restructuring of the national debt after the deep financial crisis of 2001.

another setback

The ruling is another setback for the country, which is fighting against annual inflation close to 300% and a recession that is worsening, even after the “shock therapy” by President Javier Milei. The South American nation would risk having difficulty paying back some of its debt if it is forced to shell out $1.5 billion in the case, its lawyers argued last month.

Milei’s spokesperson did not immediately respond to a request for comment.

The root of the case is in the default of US$95 billion of the country’s debt in 2001, in the midst of one of the worst financial crises in its history. The GDP-linked coupons, which are paid when economic growth reaches a set threshold, were part of a restructuring program.

The dispute arose after Argentina changed the base year for calculating growth in 2013. The hedge funds, which also include HBK Master Fund LP, Hirsh Group LLC and Virtual Emerald International Ltd., alleged that Argentina made the changes to avoid bond payments.

The changes were necessary to prevent bond yields from being guided by a “obsolete measure of GDP from 1993″until 2035, Argentina’s lawyers argued.

Earlier this year, the appeals court ordered the country to deposit €310 million ($334 million) into an account ahead of a May hearing.

Argentina must now pay the coupon holders, said Aidan O’Rourke, a lawyer at Quinn Emanuel Urquhart & Sullivan who represents the funds.

“As ordered by the court, Argentina must also now publish the GDP data required for securities for each year beginning in 2014, so that payments for those subsequent years can be evaluated.“, said.

With information from EFE and Bloomberg