Funds Can Pry Back Argentina’s $1.4B Curtain

MANHATTAN (CN) - Argentina must let Republican billionaire Paul Singer's hedge funds peek behind the curtain of its reported sale of $1.4 billion in U.S. dollar-denominated bonds on the local market, a federal judge ruled Wednesday.

U.S. District Judge Thomas Griesa held today's emergency hearing on the heels of Argentina's announcement of a fundraising campaign that the nation expects to close in two days.

Singer's hedge funds NML Capital and Aurelius Capital Management see the news as an opening for them to collect a debt from 2001.

Griesa seemed to agree, telling an attorney for the funds in the hour-long hearing: "I believe the parties that you represent are entitled to discovery about this new financing."

This latest ruling adds a new irritant to the already-icy relationship between the judge and the Argentinean republic.

For his rulings in favor of Singer's hedge funds, which gobbled up Argentina's distressed debt in 2001, Griesa has already had his face superimposed onto the body of a vulture on the streets of Buenos Aires.

NML and Aurelius sued the republic in New York seven years later to reclaim 100 cents on the dollar. Countries like Peru, the Congo and Argentina have vilified his funds for this business model, but U.S. courts have routinely found that he holds legally binding contracts.

Argentina complains that Griesa's findings in favor of the hedge funds sidestep measures aimed at settling international debt restructuring. The republic says it participated in two such restructuring plans in 2005 and 2010 that satisfied roughly 93 percent of the creditors.

NML, Aurelius and an increasing number of other creditors have found a sympathetic ear in U.S. federal and appellate courtrooms, however, with claims that they deserve to be made whole.

"This is a legitimate inquiry," Griesa said, referring to the funds' effort to collect on the proceeds of the new sale. "That's a legitimate quest."

Dechert attorney Robert Cohen told the court that the Argentinean press have been the sale as an attempt to wiggle around the U.S. judiciary.

"The headlines say this was a transaction done in order to evade Griesa," he said.

Lawyer Jonathan Blackman, who represents Argentina for the firm Cleary Gottlieb Steen & Hamilton, brushed this accusation aside.

"The Argentine press prints a lot of things, and some of that are planted by his client," Blackman said, referring to the hedge funds.

Griesa did not factor these allegations into his ruling.

"I do not take seriously the press accounts about evading my [ruling], though maybe there's something to it," he said.

Singer's funds also claimed to have information that the German-based Deutsche Bank and Spanish-based Banco Bilbao Vizcaya Argentaria (better known by the initials BBVA) would also take part in the sale.

This assertion dragged Deutsche into court, and one of its lawyers called it "unfortunate and deeply troubling" that the hedge funds never provided them with details.

With the sale Argentina announced around the corner, Griesa ordered the parties to start discussions about the discovery in the courthouse. Attorneys from Deutsche will participate in that meeting.

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