Argentina pays up on debt

The Economy Ministry in Buenos Aires announced Tuesday that it had deposited $161 million (127 million euros) to pay interests on bonds it restructured in 2005 and 2010.

The money was made available for payments to creditors in two accounts at the state-run Nacion Fideicomisos bank in Buenos Aires, which replaced the Bank of New York Mellon as Argentina's trustee bank for such payments, the ministry said in a statement.

"By making said deposits, the Argentine Republic has once again demonstrated its unbreakable commitment to fulfill all its obligations to bondholders and contribute by any means available to preserve their right to collect payment," it added.

Argentina is eager to meet its obligations to creditors who agreed to take steep losses on their bond investments after the country was unable to service debts to the tune of $100 billion following its 2001 economic crisis.

In two restructurings in 2005 and 2010, more than 92 percent of Argentina's creditors accepted heavy losses of up to 70 percent of the face value of their bonds in exchange for new sovereign debt.

The announcement of a resumption in payments to exchange bondholders, however, comes in defiance of a US court ruling, which has barred Argentina from paying those creditors before meeting the financial demands of a group of US-based hedge funds.

The hedge funds, including NML Capital and Aurelius, bought up defaulted Argentine bonds for 20 percent of face value, and have sued the country for full payment, totaling $1.5 billion.

Argentina held in contempt of court

On Monday, New York District Court Judge Thomas Griesa ruled Argentina was in contempt of court after Buenos Aires adopted legislation allowing a resumption of payments via a new trustee bank.

"The problem is that the Republic of Argentina has been and is now taking steps in an attempt to evade critical parts of the order," Griesa said, adding: "The court holds and rules that those proposed steps are illegal and cannot carry on."

Argentine cabinet chief Jorge Capitanich, however, brushed off the ruling, saying it had "no basis or impact."

"Sovereign immunity law prohibits contempt penalties against foreign states," he said, referring to a potential contempt penalty of $50,000 per day.

It is, however, unclear if Argentine bondholders will step forward to collect the interests made available. Creditors might by unwilling to defy the US court. So far, only Mexican billionaire David Martinez has said he has no problem collecting payment in Buenos Aires.

uhe/cjc (dpa, AP, Reuters, AFP)