Argentina lost a court request for more time to pledge assets to avoid the enforcement of a ruling on the $16.1 billion it owes for the expropriation of the state-controlled energy company YPF, allowing the beneficiaries to seek and attach assets in the United States or elsewhere to recover what they are owed.
Argentina had a “reasonable period of time” to begin pledging assets or seek an appeal of the judgement, US District Judge Loretta Preska said in a ruling.
The country, however, argued that a deep economic crisis, high inflation and a lack of access to international credit markets was preventing it from pledging the assets.
Preska said in response that while the court sympathizes with these hardships, “the argument demonstrates that it has not taken, and purportedly cannot take, steps toward payment and that it has no timeline for doing so.”
Sebastián Maril, CEO of financial research company and advisory firm Latam Advisors, said in a post on X that he understands the judge is recommending Argentina starts to take those steps to deal with the $16.1 billion judgement.
The ruling is in favor of Burford Capital, a London-based finance and asset management firm that financed the lawsuit for Argentine conglomerate Petersen and US-based investment firm Eton Park. The court in Manhattan had previously ruled that Petersen and Eton must be fairly compensated for the expropriation their stakes in YPF, which were 25% and 4%, respectively, at the time of the nationalization. Argentina paid Spain’s Repsol $5 billion in 2014 for its 51% stake in YPF that was seized in 2012.
With the latest ruling, the beneficiaries of the court ruling can take sovereign assets held abroad as a form of payment, Maril said.
He added, however, that “embargoing sovereign assets is very complex.”
A bigger problem for Argentina is that, as long as the judgement remains unpaid, 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. It could also slow efforts by the country’s new right-wing president, Javier Milei, to privatize the 51% stake in YPF as he has said he plans to do.
In December, Milei’s government said it is willing to pay the compensation.
“Argentina will comply with its commitments and will always respect its contracts, and will always respect the decision of justice in all orders and under all circumstances,” presidential spokesman Manuel Adorni said at the time, adding that alternatives for making the payment would be studied.
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 $27 billion in international reserves. Most of this exposure is tied to the YPF case.