Well, that didn’t last long.

Remember how last week we celebrated the Unholy Alliance between Argentina, the US and the IMF in their crusade against the Vulture Funds? Because it is unfortunate for me to announce that the whole thing has fallen apart.

According to Reuters. the International Monetary Fund “no longer plans to ask the U.S. Supreme Court to review Argentina’s case in its decade-old legal battle with holdout creditors due to a lack of support from the U.S. government,” the organization said on Tuesday.

“IMF Managing Director Christine Lagarde had planned to recommend that the IMF’s board approve a friend-of-court brief in support of the case by the end of this week, but decided not to. The brief would have been the first the IMF filed with the highest court in the United States.


The news is likely to sharply hit prices of Argentina’s bonds, which had rallied on news of the IMF’s planned brief.


The IMF, the Washington-based global lender, has said it was worried a ruling against Argentina would make it more difficult for other countries to restructure their debt and put financial calamity behind them.


The board discussed Lagarde’s recommendation on Tuesday. But the United States, the IMF’s largest and most influential member, no longer supported the Fund’s planned filing to the Supreme Court, known as an amicus curiae brief.


The United States said it too was concerned a ruling in favor of holdouts could make sovereign debt restructurings less predictable and orderly, and had serious concerns about lower court decisions.

But the United States did not believe it was the right time to file a brief in support of the case, while litigation was still pending in lower courts, an official at the U.S. Treasury said.


“The Managing Director’s recommendation was premised on U.S. support, as it would not be appropriate for the IMF to file this brief without that support,” an IMF spokesman said.


“The Fund remains deeply concerned about the broad systemic implications that the lower court decision could have for the debt restructuring process in general.


A Fund official said it would have been inappropriate to file a brief on behalf of Argentina in a U.S. court without the support of the U.S. government, as it could pitch the IMF into a dispute between two of its members and violate its neutrality as an international organization.

And here’s some background information about the case that you probably don’t need, since the reason you’re reading this is because you were already following it:

Over the last decade, holdout investors and Argentina have sparred in the U.S. courts over the South American country’s $100 billion default in 2002. Holdouts declined to take part in two restructurings in 2005 and 2010 that drew participation from 93 percent of bondholders, who accepted returns as low as 25 cents on the dollar.

Investors including Aurelius Capital Management and NML Capital, a unit of billionaire hedge fund manager Paul Singer’s Elliott Management, have refused a deal and are suing Argentina to recover the full value of their assets.

Argentina is asking the Supreme Court to void an October 2012 ruling by the 2nd U.S. Circuit Court of Appeals in New York, which found it had violated a clause in its bond documents requiring it to treat all creditors equally.

(Story via Reuters, photo via Wikipedia)