Tuesday, July 24th 2012 - 21:13 UTC

US sides with Argentina in “pari-passu” controversy with defaulted bondholders

Argentina asked a US federal appeals court to reverse lower-court rulings that could help creditors including Elliott Management Corp.’s NML Capital Fund collect on 1.4 billion dollars in defaulted bonds.

Solicitor Blackman: “92% of debt-holders recognized that the sensible thing to do was to take a haircut”

Argentina, which defaulted on 80 billion dollars in foreign debt in 2001, argued that US District Judge Thomas Griesa in Manhattan was wrong in holding that a provision in the bonds bars the Republic from paying bondholders who agreed to debt restructurings in 2005 and 2010 before it pays creditors who refused to take the deals.

“They say this boilerplate clause is a nuclear weapon that gives them the right to veto a sovereign debt restructuring,” Jonathan Blackman, a lawyer representing Argentina, argued to a three-judge panel of the federal appeals court in Manhattan.

Argentina claims that upholding Griesa’s rulings would undermine the debt agreements, trigger a new financial crisis in the republic and make it impossible for countries including Greece and Spain to restructure their debt in the future.

Griesa agreed with the interpretation of NML and the other investors of the so-called pari-passu clause in the bonds providing that Argentina’s obligation to pay “shall at all times rank at least equally with all its other present and future unsecured and unsubordinated external indebtedness.”

He ruled that Argentina’s policy of making payments on restructured bonds issued in 2005 and 2010 exchanges, while refusing to pay anything to the holdout creditors, violates the provision.

Ted Olson, a lawyer for NML, argued that Griesa properly found that Argentina’s refusal to pay the holdouts was, in effect, a subordination of their rights to the bondholders who participated in the restructurings, in violation of the pari passu clause.

“We’re entitled to equal treatment,” Olson told the judges. “We’re not getting equal treatment.”

If successful on the appeal, Olson said NML plans to seek an order finding Argentina in contempt of court should it try to pay holders of the restructured bonds before the holdouts. Investors could pursue US banks and others if they knowingly aid the country in violating the court’s order, he said.

“Argentina, a G-20 nation with more than 46 billion dollars in unrestricted reserves, has ample resources to pay those ‘nonperforming’ obligations just as it now pays its other obligations,” the investors, led by NML Capital, argued in a brief with the federal appeals court in New York. “It simply refuses to do so -- despite years of litigation and the entry of multiple judgments against it.”

Argentina claims the pari passu clause doesn’t prevent it from paying the 92% of bondholders that agreed to exchange their defaulted debt for new bonds. “Ninety-two percent of the debt-holders recognized that the sensible thing to do was to take a haircut,” Blackman told the judges.

The US government, in a separate brief, supported Argentina’s interpretation of the pari passu clause. The US also argued that the Foreign Sovereign Immunities Act, which limits legal actions against foreign governments, bars Griesa from blocking Argentina from paying the holders of the restructured debt before the holdout creditors.

The US said Griesa’s interpretation of the pari passu clause “could enable a single creditor to thwart the implementation of an internationally supported restructuring plan, and thereby undermine the decades of effort the United States has expended to encourage a system of cooperative resolution of sovereign debt crises.”

The US said it has “concerns regarding Argentina’s continued failure to abide by its obligations.” Still, the orders issued by Griesa are “impermissibly broad” and harmful to US foreign relations, the U.S. said in the brief.

9 comments Feed

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1 slattzzz (#) Jul 24th, 2012 - 09:39 pm Report abuse
standby for the US to fook you as well. ”concerns regarding Argentina’s continued failure to abide by its obligations.” Well whats new.
2 briton (#) Jul 24th, 2012 - 09:40 pm Report abuse
And as we sat down, for the very last supper,

The waiter said,
And who’s, going to pay this time .
3 DanyBerger (#) Jul 25th, 2012 - 08:35 am Report abuse
Oh! Poor Robert Shapiro another setback for him.

He will have to take what ARG offers or will get not a single dollar to by Syringes, latex gloves, Jp1, Oncology medicines and Tuberculosis treatment from Argentina.

Is not sad?

Do you want another sized plane?


You mate when the crooks go for UK debt and will want to cover the loses from Arg. haircut.
4 Yomp to victory (#) Jul 25th, 2012 - 09:11 am Report abuse
A court has sided temporarily with the Argentine argument . That does not equate to the US siding with Argentina. Who is the imbecile who writes these banal headlines?
5 briton (#) Jul 25th, 2012 - 09:46 pm Report abuse
Your envious and jealousy,
Is astonishing,

If you was not at the last supper,
How do you know who the waiter was?

Ya cant fool us ,.
6 hernanimken (#) Jul 25th, 2012 - 10:09 pm Report abuse
the point should be: what does an american judge have to say on what a foreign country does?
7 DanyBerger (#) Jul 26th, 2012 - 08:09 am Report abuse
@ briton
The waiter doesn’t care but the owner yes and your owner (bank lenders) all have he same surname.
And is very close to your home.

So you are going to pay for other hair cuts and other people hair dressing.
Every time you hear the word cut in the other side the sound is clinck cash!
8 British_Kirchnerist (#) Jul 26th, 2012 - 10:43 am Report abuse
#4 Wellusually they are incredibly biased against Cristina, so how do you like a taste of your own medicine?!
9 briton (#) Jul 26th, 2012 - 08:34 pm Report abuse
no bankd near me,

unlike you, eye not be rich,

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