Argentina clears way for repayment of ‘holdout’ creditors

Move to end decade-long legal battle triggered by 2001 default
epa05237098 Argentine senators debate the status of debt with several creditors in Buenos Aires, Argentina, 30 March 2016. The Argentinian senate is discussing the adoption of a law to pay New York-based hedge funds 4.65 billion US dollar to resolve all debts accrued during the nation's 2001 default. EPA/STURLA FERNANDO
Argentina’s congress has cleared the way for the repayment of its “holdout” creditors and the end of a decade-long legal battle triggered by its 2001 default on $100bn of debt.
After a marathon 14-hour debate that ran into the early hours of Thursday, senators voted overwhelmingly to repeal laws that prevent Argentina from paying the holdouts, which rejected debt restructurings after the default. 
If remaining legal hurdles are now cleared in the US — with a key court hearing in New York set for April 13 — Argentina will be able to make its long-awaited return to the international capital markets. First off would be a debt issue of up to $12.5bn to repay the holdouts, which would be led by US billionaire Paul Singer’s hedge fund, Elliott Management. 
“This is a historic day,” said Gabriela Michetti, the vice-president, after the government’s proposal won the support of 54 senators, with only 16 voting against the law. She said the holdouts issue was like “a sword of Damocles hanging over our heads”. An end to the problem would enable Argentina to borrow at “much more reasonable interest rates” and to restore trust among the rest of the world, she added. 
The legislation, passed by congress’s lower house earlier in March, was demanded by a New York court in order for injunctions to be lifted that prevented Argentina from paying bondholders with restructured debt, forcing Buenos Aires to default for the second time this century in 2014. 
An end to the default would represent an important milestone for the centre-right administration of President Mauricio Macri, who was elected last year on promises to restore order and normality to Argentina’s struggling economy after 12 years of populist rule. It would allow the government to issue foreign debt to plug a gaping fiscal deficit without resorting to austerity measures or spurring inflation that is running at about 30 per cent. 
Approval by Congress of the legislation marks a significant triumph for Mr Macri, whose “Let’s Change” coalition does not have a majority in either house. Although the opposition Peronist party controls 42 of the senate’s 72 seats, analysts say many opposition senators supported the government’s bill because of pressure from provincial governors who need access to credit to implement infrastructure projects that can reactivate regional economies. 
“We have built 93 per cent of a bridge and if we don’t finish it, it will all have been for nothing,” said Miguel Ángel Pichetto, who leads the senate’s Peronist block and voted in favour of the law. He was referring to the 93 per cent of creditors who accepted the restructuring deals in 2005 and 2010 of the previous Peronist government, pointing out that if agreements were not also reached with the holdouts then Argentina would remain starved of foreign investment. 
If Argentina recovers its market access, economists estimate that the country — including regional governments and the private sector — could issue more than $30bn in debt this year.