Argentina's Defaulted Sovereign Debt: Dealing with the 'Holdouts' [March 7, 2013] [open pdf - 358KB]
"In December 2001, Argentina suffered a severe financial crisis, leading to the largest sovereign debt default in history. In 2005, after prolonged, contentious, and unsuccessful attempts to restructure the debt, Argentina abandoned the negotiation process and made a unilateral offer. The terms were highly unfavorable to creditors, but $62.3 billion of the $81.8 billion in principal owed was exchanged. A diverse group of 'holdouts' representing $18.6 billion did not tender their bonds, and some have opted to litigate instead. These actions resulted in attachment orders against Argentine assets, leaving the country unable to access the international credit markets and mired in litigation. Holdout creditors also lobbied against Argentina's debt policy, which has triggered actions by the U.S. government and legislation in previous Congresses. […] The Argentine government filed its final papers before the appellate court on February 1, 2013, arguing that it would not be able to fulfill a court order requiring full payment to litigant holdouts. It did, however, suggest that to meet the concern over equal treatment it could arrange to reopen the previous bond exchange to allow those who did not participate in it to reconsider their position. Some holdouts have suggested that this may be an acceptable option. The issue remains unresolved pending outcome from the February 27, 2013, court proceedings. This report reviews Argentina's financial crisis, the bond exchanges of 2005 and 2010, ongoing litigation, prospects for a final solution, related U.S. legislation, and broader policy issues. These include lessons on the effectiveness and cost of Argentina's default strategy, the ability to force sovereigns to meet their debt obligations, and options for avoiding future defaults like Argentina's."
CRS Report for Congress, R41029