Fitch on Tuesday downgraded Argentina's credit rating to CC from B, a five-step cut suggesting that the country could probably find itself in default once again after a US federal judge ordered the Buenos Aires government to make a $1.3-billion payment to so-called holdout investors who purchased debt from the country's historic 2002 default.
The government of President Cristina Fernández de Kirchner on Tuesday filed an appeal with the US Second Circuit Court of Appeals against the order issued by US District Court Judge Thomas Griesa of New York. Griesa said that Argentina must deposit the money in escrow as a guarantee to the holdout investors by December 15.
In its appeal, Argentina claims that it cannot legally offer a better deal to the holdout investors, who want their money under the 2002 terms, against those who agreed to the restructurings. A larger bond holders group agreed to two rounds of debt restructurings that took place in 2005 and 2010, in which Argentina issued new bonds at steep discounts. Economy Minister Hernán Lorenzino has said that paying holdout investors could easily condemn the country to a second default.
The case being fought out in the US federal courts is also attracting some big legal names. Former US Solicitor General Theodore Olson, who represented President George W. Bush in the re-election recount in Florida in 2000, is representing the holdout investors led by Elliott Management's NML Capital Ltd. The asset fund sought and obtained a court order for the confiscation of an Argentinean navy vessel, which has been held in a port in Ghana since October 2.
David Boies, who led the Justice Department fight that sought Microsoft's breakup and represented New York Yankees owner George Steinbrenner in a suit against Major League Baseball, is taking the case for the opposing group of investors.