Argentina ready to appeal in GDP warrants case

Argentina said it deposited $337 million in a trust as a guarantee to appeal a London court ruling that it manipulated data to reduce payments on its GDP-linked warrants in the 2000s.

The cash-strapped nation lost the $1.5 billion lawsuit last year when the court ruled the government’s changes in the calculation of GDP cut the potential returns on the growth-based warrants. A number of investors, including HBK Master Fund and Palladian Partners, sued for compensation.

Argentina issued the warrants as a sweetener to attract investors to a deal to restructure $95 billion in bonds in 2005 after defaulting on them during an economic crisis in 2001. The sovereign notes were to pay out if the economy expanded by more than a certain threshold, helping to soften the blow of a 65% haircut in the bond swap.

The investors, which also include Hirsch Group and Virtual Emerald International, sued the country on the grounds that it changed the calculation to avoid paying out on the warrants or to reduce the size of the payment.

To appeal the court’s decision, the Argentine government had to make the $337 million deposit as a guarantee by April 5 or risk having to pay the full amount of the lawsuit.

The appeal comes as the sovereign fights another — and much larger — judgement for the expropriation of YPF, the state-run energy company. The sovereign lost the case last year, with a New York court ordering that it pay $16.1 billion in damages for taking over the company.

The judgements could complicate the efforts of right-wing President Javier Milei to pull the country out of a financial mess and tame the world’s highest inflation rate, including by borrowing $15 billion from abroad. As long as the judgements remain unpaid or unresolved, it could make it hard for the sovereign to sell bonds in international markets if investors fear the country’s repayment capacity could be hampered or its payments seized.

The International Monetary Fund has estimated that Argentina faces a “legal exposure” of $25 billion, equivalent to 6% of its GDP and nearly all of its $28 billion in international reserves.