On March 1, 2013, the U.S. Court of Appeals for the Second Circuit ordered Argentina to submit its proposal for the terms on which it is prepared to make payment on approximately $1.3 billion of unpaid debt obligations stemming from the country’s $95 billion debt default a decade ago. The court’s ruling is the latest milestone in the marathon court battle between the Republic of Argentina and NML Capital Ltd., a vulture fund affiliate of the hedge fund firm Elliott Associates, run by billionaire Paul Singer.

Following its 2001 debt default and ensuing economic collapse, Argentina agreed to exchange defaulted bonds with restructured debt obligations initially paying bondholders approximately thirty cents on the dollar. However, NML did not participate in the exchange offer, demanding instead that Argentina make payment in full on the principal amount of the bonds it purchased at heavily discounted prices. NML, based in the Cayman Islands, is seeking to repeat its landmark victory when it won a case against Peru in the 1990s, recovering approximately 400% what it paid for Peru’s debt. Those who participated in Argentina’s 2005 exchange offer have gradually been made whole to the tune of approximately seventy-one cents on the dollar which pales in comparison to NML’s recovery in the Peru case.

The dispute focuses on provisions in the original bond terms that require equal treatment for all bondholders. President Cristina Fernandez has historically vowed not to pay anything to the “vulture funds” that she views as impeding Argentina’s economic recovery. However, in a speech to the Argentine congress on March 1st, President Fernandez indicated a willingness to pay the holdouts (those bondholders, such as NML, that did not participate in the prior exchange offers), but on terms not more favorable than those offered to bondholders in the two prior exchange offers.

The court set March 29th as the deadline for Argentina to submit a proposal for the terms of new bonds (e.g., formula, schedule, interest rate, assurances of payment) that would be exchanged for the Argentine bonds still held by NML. Check this blog for availability of the court’s March 1st order.