What the US Supreme Court decides in a key court case involving Argentina and its bondholders will greatly impact how sovereign debt restructuring is done in the future.
The essence of the decade-long lawsuit between the country and a handful of its creditors is: Can bondholders demand full repayment of what they lent to a country even when others have settled for a haircut?
Argentina’s 2002 default of around $100bn (£61bn) was the largest at the time, until Greece’s around 200bn euros debt restructuring.
What the US Supreme Court decides could have bearing on the question of so-called “hold-outs”.
In 2005 and 2010, 92% of Argentina’s bondholders accepted around 30% repayment in two debt exchanges.
But not two hedge funds, NML Capital and Aurelius, who are demanding 100% repayment of their $1.3bn lent to the country.
Argentina’s position is that these creditors won’t be paid at all since they refused to participate in the debt exchanges.
But an influential US appeals court ruled that Argentina cannot just pay the ones that accepted the debt restructuring, but must repay all of its creditors, including the hold-outs.
If it doesn’t, then it opens the possibility of a technical default by the country.