Supreme Court To Weigh Next Steps In Argentina Bonds Case

FILE - This June 28, 2012 file photo shows people waiting in line to hear cases at the Supreme Court in Washington, Thursday, June 28, 2012. A unanimous Supreme Court ruled Monday that prosecutors may not rely on an international chemical weapons treaty to convict a woman who attacked her husband's mistress. The justices threw out the conviction of Carol Anne Bond of Lansdale, Pa., who was prosecuted under a 1999 law based on the chemical weapons treaty. Bond served a six-year prison term after being convicted of using toxic chemicals that caused a thumb burn on a friend who had become her husband's lover. (AP Photo/Evan Vucci, File) (AP)

The U.S. Supreme Court is meeting privately Thursday to determine how to respond to Argentina's appeal of lower court decisions ordering it to repay more than $1.3 billion in defaulted bonds.

U.S. lower courts have ordered Argentina to pay that amount plus interest to hedge funds led by billionaire Paul Singer's NML Capital Ltd., which snapped up the debt left unpaid when the Argentine economy crashed in 2001-02 and went to court seeking payment in full. Holders of 92 percent of the debt agreed long ago to accept bonds of lesser value in exchange for regular debt payments.

The justices aren't expected to announce their decision until next week. The court could ask for input from President Barack Obama's administration or send the case back to the New York appeals court for more information on how to interpret state law. Although it is highly unlikely, the court could also decide whether to take the case or turn it down.

Argentina has warned that being forced to pay off the old debt would force it into a new default. But some analysts dispute that argument, saying Argentina would be able to meet the payments despite its economic troubles.

"I believe that Argentina will still be solvent if the Supreme Court decision favors the holdouts and Argentina has to pay these claims. From a macro standpoint the capacity to pay is there," said Alberto Ramos, who analyses the country for Goldman Sachs.

"If the (Argentine) authorities were able to put the issue of the holdouts to rest, they would benefit from broader access to more conventional and stable domestic and foreign financing sources," Ramos added. "This and a bit of fiscal consolidation, which would also benefit the economy tremendously, would likely put Argentina in a position to honor the claims of the holdouts without necessarily sliding into another crisis."

Restoring Argentina's sense of pride and sovereignty after the economic collapse has been the central goal of President Cristina Fernandez and her late husband and political predecessor, Nestor Kirchner. The presidential couple negotiated or paid off most of Argentina's defaulted debt, nationalized the pension system, and retook control of the national airline and oil company.

They also kept energy cheap through subsidies and dug deep into the treasury to redirect revenue to the poor through handouts.

For several years, Argentina enjoyed annual growth of 7 percent fueled by the high prices that foreigners paid for the country's soybeans and other agricultural commodities. But now Argentina suffers from a shortage of dollars, one of the world's highest inflation rates and an inability to tap into global credit markets because its debt default remains unresolved.