Global Economy, Economic Environment, Recession, Money & Finance, Government Finance
Facing insolvency, the Argentine government defaulted on its roughly $130 billion of foreign debt in late 2001 following a four-year economic recession. Once the economy recovered, Argentina offered holders of defaulted bonds new debt instruments via sovereign restructurings in 2005 and 2010. In order to reach elevated acceptance levels, the new bonds were governed mostly under foreign law (some in Europe and some in New York) and included a “rights upon future offers” clause—giving bondholders the possibility to participate in any eventual voluntary restructuring offering better terms. As a result, 93% of the holders of defaulted debt accepted the restructurings. The remaining 7% (the “holdouts”) have been seeking payment in full via legal venues, with some turning to the U.S. courts.