A U.S. court recently ordered Argentina to pay USD 1.3 bn to hedge funds that refused a restructuring of its debts after the country’s 2001 default, a restructuring which most creditors eventually accepted. The U.S. court ruled that equal treatment of bondholders requires paying the holdouts in full if the restructured bonds are honoured. If Argentina fails to make the December 15 payments to the hedge funds, it (and intermediaries such as Bank of New York Mellon) will not be allowed to make regular payments to its other restructured bondholders, raising the likelihood of a technical default on USD 24 bn in restructured debt. Argentina has stated that it will appeal the decision. The ruling has potentially far-reaching implications, since many countries have issued debt under U.S. law without collective action clauses, which allows a majority of creditors to bind holdouts to a restructuring.

I believe that this is a big story, which is still under-reported in the traditional media. If you come to my blog because you're interested in dance, cognitive neuroscience or the arts, this story may have escaped you. But, as you may or may not know, I currently work in finance and this is one of the cases I've been following. What makes the case particularly interesting is that under U.S. law interested parties are allowed to appeal against the court ruling. And so one can expect holders of Argentinean restructured debt and Bank of New York Mellon to appeal against the court ruling.

I also just LOVE the legal language. Take for example this ruling:

"IT IS HEREBY ORDERED that the motion by the Exchange Bondholder Group for leave to intervene as interested non-parties for the purpose of appealing orders entered by the district court on 11/21/12 and for the purpose of seeking a stay pending appeal is GRANTED."

You might have to read this twice. I guess that this is what lawyers are for. I can imagine a client asking his lawyer: "so, does this mean we won?"

FT Alphaville provides excellent, ongoing coverage of the case.

Felix Salmon has also blogged about it here and here.