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Two US hedge funds suing Argentina for full payment on defaulted bonds Friday rejected the country's offer to settle the suit with a deal that would give them just 25 percent of what they were seeking.
"Argentina's years of defiance cannot be cured by a convoluted offer to give (the bond-holders) yet more Argentine IOUs, worth pennies-on-the-dollar," the hedge funds said in a petition filed to a New York court.
That Buenos Aires still has not accepted a court order to pay the bonds in full "only serves to demonstrate that it does not respect its voluntarily assumed obligations or the rule of law."
"The district court's injunction was in no sense an abuse of discretion, and should be affirmed," the court document said.
US hedge funds NML Capital and Aurelius, which sued in 2012 seeking $1.3 billion, had been expected to reject the offer.
Argentina had sought to repay them on similar terms to the majority of holders of bonds who had accepted a bond restructuring after the country defaulted on $100 billion in debt in 2001.
Buenos Aires was able to get acceptance from about 92 percent of its bondholders for the two restructurings, in 2005 and 2010.
The funds, which Buenos Aires labels "vulture funds," had bought their bonds on the market at a discount and did not participate in the restructuring. Instead they went to court to seek full repayment.
According to the funds, the value of the bonds is now $1.47 billion.
However, Argentina worries that full repayment would require it to repay the restructured bonds in full as well, which some analysts say could force the country back into default.
Argentina contended that its offer to the two hedge funds satisfied the requirements of the "pari passu" or equal treatment clause under which the bonds were issued: "non-discrimination in payment priority and equal treatment among bondholders."
The case could have repercussions for the greater market for sovereign bonds, if investors believe that holdouts from post-default restructuring deals could ultimately get special treatment.
That could prevent any such deals from being achieved, though some analysts -- and the two hedge funds which sued -- argue the Argentina case would not stand as a model.