US court finds Argentina in contempt of court over hedge fund debt

Argentina has been found to be in contempt of court by a US judge for not repaying debt to US hedge funds, the BBC reports.

Argentina was ordered by a US court earlier this year to repay US hedge funds, NML Capital and Aurelius Capital Management, which had previously bought up Argentinian debt at a discount when the country defaulted back in 2001.

However Argentina refused to repay the hedge funds, which it describes as “vulture funds”, for demanding full repayment instead of accepting a settlement agreed with the majority of its bondholders to repay a portion of the total debt.

The US then took steps to block an interest payment back in July that Argentina had planned to distribute to bondholders who had agreed to the settlement.

Argentina has since threatened to sue the US for judicial malpractice for allowing the funds to push the country into default and has also attempted to introduce new legislation to avoid the US court ruling.

However Judge Thomas Griesa has now concluded that Argentina was in contempt of court for refusing to repay debt in full to the US hedge funds. A penalty for the country will be decided at a later date.

The Argentine foreign ministry has issued a statement arguing that the ruling “violates international law.”

It says: “Griesa holds the sad record of being the first judge to declare a sovereign state in contempt for paying a debt, after failing in his attempt to block the restructuring of the foreign debt of Argentina.”