BUENOS AIRES – Argentina is in a quandary. Prior to its 2005 sovereign-debt exchange, its legislature enacted a “lock law,” which barred the way to any future offers to holders of bonds on which Argentina defaulted in 2002. While the lock law helped to boost the participation rate in the 2005 exchange, holdout creditors remained, and have pursued litigation to force repayment.
In late November, Thomas Griesa, a United States federal judge in New York, ordered Argentina to deposit the $1.33 billion owed to holdouts into an escrow account by December 15. Griesa lifted the stay on his order from February 2012, following indications from Argentina’s government that it intended to ignore the ruling – including public statements calling the holdouts “vulture funds” and a vow by President Cristina Fernández de Kirchner never to pay. The ruling, pending appeal, leaves Argentina with three options: violate its own law, violate US law, or default again.