Acceleration threatens to make Argentina holdout crisis messier
By Davide Scigliuzzo
NEW YORK, Aug 12 (IFR) - Holdout investors' legal battle with the Argentine sovereign could get a lot messier should holders of newly defaulted debt decide to declare principal and interest immediately due.
The move, known as acceleration, could push Argentina into a new restructuring on up to US$30bn in debt and significantly complicate efforts to put its decade-long debt woes to rest.
"It would be a mess," said Antonia Stolper, a partner at Shearman & Sterling. "Once in that world, you have created a whole new set of holdouts and the situation could become highly unstable."
An acceleration on the restructured bonds would also deal a blow to a group of hedge funds led by Elliott Management and Aurelius Capital, who could suddenly have to share their claim with a much larger pool of investors.
"In the event of an acceleration, it is hard for me to imagine that Argentina would settle with (the holdouts) without having a plan for the exchange bondholders. It's just not realistic," said Stolper.
Accelerating their claims could also be a way for exchange bondholders to force holdouts to come to a compromise sooner rather than later.
"The only leverage the current restructured bondholders have over Elliott is to accelerate," said Thomas Mullen, a partner at TWM Capital. "Once this takes place, Elliott loses its advantage as being the only thorn in Argentina's side."