A coalition of hedge funds has reignited a high-stakes legal dispute over Argentina’s 2020-issued GDP-linked securities, seeking repayment totaling $3.2 billion based on disputed growth calculations. The move revives a long-standing conflict involving sovereign debt restructuring and Argentina’s economic performance metrics.
- Hedge funds demand $3.2 billion in payments from Argentina’s GDP-linked bonds issued in 2020
- Dispute hinges on conflicting GDP growth figures: government reports 2.1% in 2023, funds claim 3.9%
- Legal motion filed in U.S. District Court for the Southern District of New York
- Potential payment increase of over $1.1 billion if external data models are accepted
- Credit default swaps on Argentine debt have widened 18 basis points since filing
- Case may set precedent for future sovereign debt instruments tied to economic performance
Hedge funds, including two prominent investment vehicles linked to New York-based managers, have filed a new motion before the U.S. District Court for the Southern District of New York, challenging the Argentine government’s methodology for calculating sovereign payments tied to GDP growth. The dispute centers on $3.2 billion in bonds issued in 2020 under the country’s 2019 debt restructuring agreement, which promised payments proportional to Argentina’s GDP expansion above 1.5% annually. The funds argue that Argentina’s official figures—reporting a 2.1% GDP increase in 2023 and 2.8% in 2024—understate growth due to exclusion of informal sector data and currency adjustments. They assert that independent models, including those using international trade and electricity consumption metrics, indicate a 3.9% growth rate in 2023 and 4.2% in 2024, triggering higher payment obligations. This discrepancy could increase the total payout by over $1.1 billion. The legal action follows months of stalled negotiations between Argentina’s Ministry of Economy and creditor representatives. The government maintains that its official GDP figures, published by the National Statistics Institute (INDEC), are the legally binding benchmark. However, the hedge funds contend that the original bond covenants did not specify which data source to use, opening room for interpretation. Market participants are closely watching the case, as a favorable ruling could set a precedent for sovereign debt instruments tied to macroeconomic indicators. Credit default swaps on Argentine sovereign debt have widened by 18 basis points since the filing, reflecting increased perceived risk. The outcome may also impact future bond issuances by emerging market governments relying on performance-linked structures.