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The so-called "vulture funds" holding bad Argentine debt are expected to reject the government's latest settlement offer, potentially leaving Buenos Aires with a huge bill.
The US Court of Appeals has given fund NML Capital and Aurelius, which have large numbers of Argentine bonds and oppose a debt restructuring deal, until April 22 to respond to Argentina's offer.
The court must then decide whether or not to uphold US District Judge Thomas Griesa's November 21 order that Argentina immediately pay the funds $1.33 billion in capital and interests accrued since it defaulted in 2001.
If the court confirms Griesa's ruling, Argentina could be forced back into default, unraveling a long debt restructuring effort aimed at restoring the South American country's access to the capital markets.
Argentina's President Cristina Kirchner would have the option of appealing to the US Supreme Court, but there is no guarantee the case would be accepted or that Buenos Aires could continue to put off repaying the bonds.
Against this complex legal background, experts see various possible scenarios if, as expected, the judgment goes against Argentina, said Gabriel Torres, an analyst with the Moody's ratings agency.
"For us the great issue continues to be whether Argentina will be forced to default or not," he said.
That threat arises because Griesa not only ordered Argentina to repay "holdouts" like NML and Aurora but also to give equal treatment to the 92 percent of original bond holders who had previously accepted a swap for new restructured bonds.
If it upholds the lower court ruling, the appeals court also must decide whether to seize Argentina's deposits in the Bank of New York, its paying agent to holders of the restructured bonds, in order to pay off NML and Aurora.
"The worst scenario for Argentina would be if it is told 'you have to pay everything' and in addition the Bank of New York is entered into, and there is no possibility of appeal and it has to be settled quickly," said Torres.
He said that would imply an interruption of payments to the bondholders who had accepted a swap.
The opposite extreme would be for the court to say "we accept Argentina's proposal" and force funds to accept a swap of defaulted bonds for new ones of less value, said Torres, adding that most experts do not think that will happen.
A report by the firm Shearman & Sterling, which has followed the case very closely, concludes that the court is unlikely to find the Argentine offer "to be a sufficient basis for altering Judge Griesa's" decision.
"The court has already made it quite clear that it will not 'force' the plaintiffs to 'accept a restructuring,'" it said.
The opinion is shared by Vladimir Werning, executive director of JPMorgan Chase, who believes the three judges will not accept the Argentine proposal, which he described as a "carbon copy" of its 2010 restructuring offer.
"We do not anticipate the judges to support the 'cram down' being requested by Argentina," he said.
Torres says there is still a chance the court will rule against the Argentine government but at the same time to avoid a default.
"The middle course would be that they rule that Argentina has to pay but that the Bank of New York does not have to participate, without which the funds could not be seized," he said.
"That would be positive over the short term because it would not take Argentina into a default."
Economist Arturo Porzecanski, of American University, is much more pessimistic, telling AFP he is certain "this is going against Argentina" and it will include the Bank of New York.
For him, the issue is how much time Buenos Aires will have to py.
"There are two scenarios," he said. "One in which they probably tell Argentina that it has to pay the 'holdouts,' but give it time to do so.
"Or, they give it a chance to appeal and then the Argentine government will kick it down the road until after elections in October,"
"Argentina is buying time, it's not solving problems," he warned.