Buenos Aires settles decade-long standoff with bondholders

© Martin Acosta
Argentina has paid $9.3 billion to all of its holdout creditors, ending the country’s 15-year court battle with them.

The payment was made using money from last week’s record-breaking $16.5 billion debt issue which marked the country’s return to global credit markets for the first time since 2001.

The issue of new bonds was approved by the Argentinian Senate last month as a way to pay off creditors who refused to participate in the country’s debt restructuring. Under the terms of the deal, the government had to pay $4.65 billion to US hedge funds.

Buenos Aires had previously reached a settlement with several bondholders for $250 million and €185 million.

“We have put a definitive close to this chapter,” Argentina’s Economy Minister Alfonso Prat-Gay told the media.

The country’s legal battle with its creditors goes back to 2005 and 2010 when Argentina suggested debt holders swap bonds at a steep discount of up to 70 percent off their par value. It was hoped the move would ease the country’s financial crisis following its 2001 default on $100 billion in bonds. While 93 percent of bondholders agreed on lesser-valued bonds, others, including some US hedge funds, refused to participate and went to court.

Unlike current Argentinian President Mauricio Macri, who made settling the dispute with bondholders a top priority for the country, the previous government of Cristina Fernandez de Kirchner refused to negotiate with the holdouts. Kirchner called them "vulture funds", warning they would never get more than 30 cents on the dollar.

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“If you are at war long enough, it’s very difficult to shift to a mode of peace,” said a New York lawyer and the dispute’s mediator Daniel Pollack who played a central role in the final negotiations.

According to the US Attorney General and Federal Judge Michael Mukasey, Pollack "was capable of keeping some room for maneuvering when he needed it.”

“I think what he did was a real tour de force. I don't think the case could have been resolved without him," Mukasey added.