Cry for Me Argentina

In an earlier H T Parekh column (“A Sovereign Debt Story: Republic of Argentina vs NML Capital”, EPW, 17 May 2014), I gave a brief account of the history of the Argentine debt default of 2001 and its aftermath up to a United States (US) Supreme Court ruling of 21 April 2014. To recapitulate, in 2005 Argentina attempted to restructure the debt that it had defaulted on in 2001, followed by another restructuring in 2010. In these restructurings, about 93% of the old debt was swapped for new debt, leaving 7% as “holdouts”. And some of these holdouts and vulture funds such as NML Capital, operating from Cayman Islands, which had purchased the defaulted debt from other holdouts at a deep discount, sued Argentina at the US District Court for the Southern District of New York demanding full payment.

On 21 April 2014, the US Supreme Court justices heard the arguments of Argentina and some holdout owners of the defaulted bonds led by NML Capital in one of many appeals on the district court’s rulings. The first of the expected rulings came on 16 June 2014 when the Supreme Court justices declined to hear Argentina’s appeal against the February 2012 decision of the district court. This and other rulings that followed which upheld the district court’s 2012 ruling as valid not only sent shock waves through the global financial system by threatening the integrity of sovereign debt markets, they also made Judge Thomas P Griesa – an 85-year-old US federal judge of the district court whose rulings have been called into question by many – suddenly world famous (Vilches 2014).