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Argentine President Fernandez refuses to obey US ruling

£900 million in defaulted bonds will not be repaid

ARGENTINA President Cristina Fernandez refused point blank to go along with a US judge’s ruling requiring a $1.5 billion (£900 million) repayment of defaulted bonds on Monday night.

Earlier in the day, the US supreme court had backed vulture capitalist hedge fund NML Capital in its quest to extort full-value repayment for junk bonds that it paid only fractions of their face value for.

But in a national address, Ms Fernandez vowed not to submit to extortion and said she was working on ways to keep Argentina’s commitments to other creditors.

The US order requires that the $1.5bn be paid “all together, without quotas, right away, now, in cash, ahead of all the rest” of bondholders, Ms Fernandez said.

“This represents a profit of 1,608 per cent,” she complained.

“I believe that in all of organised crime there has never been a case of a profit of 1,608 per cent in such a short time.”

Owners of more than 92 per cent of the nearly worthless debt from the country’s 2001 default had agreed to accept new bonds worth much less than their original face value, but predatory New York billionaire Paul Singer’s firm picked up discounted bonds and sued to force Argentina to pay cash in full plus interest.

“Some people say: ‘Why don’t you pay them and end all this right now?’” the president said.

“It’s because there’s another problem, even more serious.

“There’s another 7 per cent who would be able to demand payment of $15bn (£9bn).

“That’s more than half the reserves in the central bank.

“It’s not only absurd but impossible that the country pays more than 50 per cent of its reserves in a single payment to its creditors.

“It’s our obligation to take responsibility for paying our creditors but not to become the victims of extortion by speculators.”

The ruling also has implications for the restructuring of defaulted debt by stricken countries.

JubileeUSA, which speaks for a number of anti-poverty organisations, said it was dismayed that the court had rewarded speculators while harming the interests of other bondholders.

“Unfortunately the supreme court told the financial world that this behaviour is legitimate and, even more, profitable,” said executive director Eric Lecompte.

“This totally undermines how the financial system restructures debt.”

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