The 15-year saga of Argentina's record debt default took a step closer to closure this week with an unusual court filing.
The standoff finally hit a turning point when Argentina ushered in its new president, Mauricio Macri, who vowed to resolve the bitter legal dispute. On February 5, following face-to-face negotiations between creditors and representatives from Macri's administration, Argentina unveiled publicly a tender offer to pay $6.5 billion—of the total $9 billion—owed to the leading debt holders.
As a result, the South American nation settled a nearly $1 billion obligation with hedge fund EM Limited, one of six major bondholders locked in a long running legal dispute with the country. According to a court document filed this week, the deal was sealed in a decidedly unorthodox way: It was drafted and signed by both parties on a sheet of loose-leaf paper.
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"The parties agree to cooperate with each other in all respects to accomplish this settlement and to execute all papers necessary to accomplish this objective," the document read. It was signed by a representative for EM and Luis Caputo, Argentina's secretary of finance.
Also included in the document was an email between lawyers representing both Argentina and EM Limited, delineating the settlement amount as just in excess of $849 million.
However, the settlement is subject to two conditions. The Argentine Congress must approve the deal, and an injunction that has been in place since 2012 must be lifted. That clause essentially prevents Argentina from paying existing bondholders of its restructured debt unless holdout creditors are also paid.
The latter condition was given the greenlight on Friday when the U.S. District Judge overseeing the case, Thomas Griesa, ruled in Argentina's favor and agreed to remove the injunction—albeit, the ruling is dependent on a federal appeals court ruling.
In 2001, Argentina's suffered what was at the time the world's largest sovereign debt default. Although much of that debt was restructured, some of the country's more aggressive bondholders legally have been battling for full payment in various jurisdictions across the globe for more than decade.
NML Capital, a subsidiary of billionaire Paul Singer's Elliott Management and one of the six major creditors, even went as far as Ghana to detain an Argentine Naval vessel, the ARA Libertad, in an attempt at repayment.
Another hedge fund, Montreux Partners—who together with EM Limited account for about 14 percent of the total outstanding claims—also accepted Argentina's proposed settlement terms. Together, both settlement deals exceed $ 1 billion.
Elliott Management declined to comment to CNBC on Judge Griesa's decision. However, in a court document filed Thursday, the holdout creditors stated that "granting the relief Argentina seeks would simply delay resumption of negotiations by requiring Plaintiffs to return to the Second Circuit."