Argentina settled with disgruntled creditors led by billionaire Paul Singer’s Elliott Management, who had sued the country over its $95 billion default in 2001, putting an end to an epic legal battle that had dragged down South America’s second-largest economy.
Talks between government officials and the investors, including hedge funds Aurelius Capital Management, Davidson Kempner, and Bracebridge Capital, who held billions in claims on debt ended late Sunday after more than a decade of litigation that locked the country out of international capital markets and made it a pariah among global investors. Argentina will pay $4.65 billion in cash, or 75 percent of principal and interest on full claims, and will raise the funds in overseas bond markets to do so, according to court-appointed mediator Daniel Pollack.
The accord represents a victory for newly elected Argentine President Mauricio Macri, who campaigned on a pledge to reach a deal with the holdouts and reverse the economic policies of his predecessor, Cristina Fernandez de Kirchner, who had referred to the investors as “vultures” and promised never to pay them.
In restructurings in 2005 and 2010, the country imposed losses of about 70 percent on holders of the defaulted bonds. About 7 percent of creditors, including Elliott, rejected those terms and pursued lawsuits that culminated in a court order that blocked Argentina from paying its restructured debt until the nation settled with the holdouts.
Singer “was the central figure who involved himself intensely with me over the past several weeks on behalf of the ‘holdout’ bondholders. He was a tough but fair negotiator,” Pollack said in a statement. As for the Argentine officials involved in the talks, “their course-correction for Argentina was nothing short of heroic.”
Argentina has also agreed to pay some of the holdouts’ legal fees, plus a settlement for claims outside of New York, Pollack said.