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Wednesday, July 24, 2013

IMF Supports Argentina In Debt Dispute With Dissident Bond Holders


July 24, 2013 6:02 am

IMF pulls support for Argentina’s Supreme Court appeal

The International Monetary Fund has pulled plans to support Argentina’s push for a US Supreme Court review in the country’s court battle with creditors.
Christine Lagarde, IMF managing director, withdrew her recommendation that the fund file an amicus curiae brief in support of Argentina. The IMF said she took the decision after the US made clear that it would not support the move.

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A US court last year ordered Argentina to pay $1.3bn to a group of investors who had refused to accept a debt restructuring following the country’s default in 2001.
Last month, Argentina asked the Supreme Court to review the case as it continues its dispute with the creditors led by Elliott, a US fund. It came amid anticipation of a separate ruling on the case by a New York appeals court that could tip Argentina into a new technical default.
The IMF’s planned intervention was driven by concerns about the implications for future sovereign restructurings, although some experts argue that Argentina’s case is so unusual that there would be no knock-on effects.
The original plan to file an amicus brief had raised eyebrows, given the IMF move in February to censure Buenos Aires over its faulty statistics, and Argentina’s open hostility towards the IMF, which it accuses of prescribing the policies that led it to ruin.
The IMF spokesperson said it would not have been appropriate to proceed without US support, but added that the international organisation still maintained concerns.
“The fund remains deeply concerned about the broad systemic implications that the lower court decision could have for the debt restructuring process in general.”
One person familiar with the case said Washington appeared to be backing the IMF move as late as Monday. The US Treasury gave no reason for the apparent U-turn.
The Treasury said the Obama administration agreed with the IMF position that if the Supreme Court upheld the previous court ruling against Argentina, it could adversely affect other sovereign restructurings. But they said the US disagreed with Argentina’s failure to settle with western creditor nations.
The “holdout” creditors had lobbied Ms Lagarde to cancel the planned submission to the Supreme Court.
In a letter seen by the Financial Times, Michael Spencer, an attorney with Milberg, which is representing several hundred individual investors from Argentina, Italy and 17 other countries, appealed to Ms Lagarde “not to take this unprecedented and gratuitous step”.
In another letter, Gibson Dunn, the law firm representing Elliott, said any attempt to call IMF intervention neutral was “simply disingenuous”. It said the move would encourage more countries to litigate and ultimately lead to “fewer rather than more successful consensual restructurings”.
Additional reporting by Robin Harding in Washington
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