Judge orders hedge funds to reply to Argentina debt offer

A US judge on Tuesday ordered two New York hedge funds seeking a $1.33 billion payment from Argentina to respond by April 22 to an offer by Buenos Aires to repay its debt under new conditions.

On Friday, Argentina offered to pay creditors who did not participate in earlier restructuring moves with either bonds equivalent to the value of the debt during the country's 2002 default, or discounted bonds.

"It is hereby ordered that Plaintiffs-Appellees shall file a response to the payment proposal submitted by the Republic of Argentina on March 29, 2013 by April 22, 2013," a New York Appeals Court ruling published Tuesday said in part.

Argentine President Cristina Kirchner had said she was willing to re-extend the restructuring terms of 2005 and 2010 to hedge funds NML Capital and Aurelius Capital Management, which she has branded "vultures."

That offer would repay bondholders around 25 cents to 29 cents on the dollar.

Those terms were already accepted by holders of 92 percent of the bonds but was rejected by the holdouts, prolonging the long-running litigation stemming from Argentina's $100 billion sovereign debt default eleven years ago.

The plan faces an uncertain future, as the latest offer falls under the same terms as those offered to bondholders during the last debt swap three years ago.

In an October ruling, the US appeals court upheld a lower court ruling that Argentina would have to repay both sets of bonds.

Analysts do not expect the Buenos Aires plan to be accepted, leaving Argentina little legal recourse but to comply and multiply its debt problems or appeal to the US Supreme Court.

The case has sent tremors throughout the world of sovereign bonds because of the precedent it could set for the rights and treatment of investors who refuse to go along with debt restructuring pacts after defaults.

If the hedge funds are allowed to collect everything they claim, it could make it impossible for defaulters to restructure their debts without the full participation of all investors.