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Argentina pays 'vulture funds' to end debt saga

Argentina repaid the so-called "vulture funds" on Friday that sued it over billions of dollars in defaulted bonds, ending a 15-year saga and restoring its good standing on international credit markets.

[BUENOS AIRES] Argentina repaid the so-called "vulture funds" on Friday that sued it over billions of dollars in defaulted bonds, ending a 15-year saga and restoring its good standing on international credit markets.

The payment ends a decade-long battle in the US federal courts and should enable the South American country to finally lay to rest the ghost of its 2001 default, the largest in history at the time - nearly US$100 billion.

"The republic has made full payment in accordance with the specific terms of each such agreement" with holdout bondholders who had successfully sued the country, Argentina's lawyer said in a statement to the court.

Judge Thomas Griesa then gave his official blessing, lifting an injunction he had slapped on the country that effectively blocked its deals to restructure its debt until it settled with the holdouts.

Argentina forked over US$6.2 billion to settle disputes with 20 creditors. It is due to pay another US$3.1 billion in the coming days to settle lingering claims.

The move comes after Buenos Aires raised US$16.5 billion in a momentous return to international credit markets, with most of the proceeds for repaying the holdouts.

Paying off disgruntled creditors - especially New York hedge funds NML Capital, a unit of multi-billionaire Paul Singer's Elliott Management, and Aurelius Capital Management, which led the lawsuits against the country - will turn the page on a long drama that had hurt the Argentine economy.

"Argentina returns to the international financial community, closing a difficult and costly chapter for the country," said Mariano Sanchez of consultancy KPMG.

The case also raised crucial questions about contracts and the rights of both borrowers and lenders in the massive and largely unregulated global sovereign debt markets.

The payments concluded a delicate legal and financial dance that required creditors to trust they would be paid by the new Argentine government of President Mauricio Macri according to settlements negotiated in February.

The creditors were mistrustful after Mr Macri's predecessor Cristina Kirchner had for years refused to deal with them.

The conflict dates back Argentina's devastating economic crisis in 2001, when the collapse of its dollarised economic model forced the country to default on its debt.

Nearly all its creditors eventually agreed to take losses of up to 70 per cent on their bonds in a restructuring that was meant to allow the country to get back on its feet.

But seven per cent of the creditors, the so-called holdouts, refused. NML and Aurelius, which have pioneered the business of buying up cheap defaulted sovereign bonds and suing for full payment, led the campaign in a New York court to gain full repayment.

Judge Griesa ruled in the hedge funds' favour in 2012. Ms Kirchner appealed the case all the way to the Supreme Court, but never managed to overturn the New York judge's ruling.

Even so, she refused to pay, arguing it was unfair to the majority of creditors who joined the restructuring.

The leftist president famously labelled the hedge funds "vultures" for buying up the defaulted bonds on the cheap and suing the country for 100 per cent payment.

But with Argentina stuck in a prolonged economic slowdown, Mr Macri, a business-friendly conservative, pulled off a come-from-behind election win in November.

He took office vowing to get the economy back on track, notably by settling the bitter debt dispute.

Mr Singer, the hedge-fund billionaire long vilified by Ms Kirchner, recently gushed praise on Mr Macri in Time magazine's list of the world's 100 most influential people.

He wrote Mr Macri's brief profile for the issue, praising the new president's moves to devalue the puffed-up currency, reintegrate Argentina into the global economy, seek foreign investment and end the debt dispute.

"Macri still has important tasks ahead of him, including taming inflation. But if he lives up to his promise, Argentina may finally do the same," he said.

Mr Singer had the biggest payday of any creditor on Friday: his NML Capital received $2.4 billion.

That amounted to an estimated return of 369 per cent on the fund's original investment.