Summary: The country of Argentina is blaming the law firm of Cleary Gottlieb for the default on its bonds from last month, the second default for the country in 13 years.
Last month, Argentina defaulted for the second time in 13 years. Many international banks and local institutions have attempted to end the default since then, but to no avail, according to The Guardian.
President Cristina Fernandez de Kirchner and finance minister Axel Kicillof are now battling with Elliott Associates over the default.
Argentina followed the advice laid out by a memo written on May 2 by its law firm, Cleary Gottlieb. Hedge funds from the U.S., including Elliott Capital Management, are looking for repayment of the country’s bonds on original terms.
The issue was taken to U.S. court, where judge Thomas Griesa ordered the country to pay the holdouts.
Cleary Gottlieb advised Argentina on May 2 to intentionally default on the bonds so a renegotiations could be forced and the case could be moved out of U.S. judge’s hands.
If Argentina were to fire Cleary Gottlieb it could then ask Judge Griesa for a stay in his ruling.
Argentina has said that it cannot pay the holdouts because of a clause in the 2005 and 2010 negotiations. The clause says that the country must pay all of its bondholders an equal amount of money. This is the Right on Future Offers, or Rufo clause. Argentina claims that if it follows the clause and makes the payments, it could cost the country some $120 billion.
