UPDATE 2-Bondholders lose bid to lift stay in Argentina litigation

Fri Nov 1, 2013 2:06pm EDT

By Nate Raymond

NEW YORK Nov 1 (Reuters) - A U.S. appeals court on Friday said it would leave a freeze in place on an order requiring Argentina to pay $1.33 billion to bondholders suing for repayment in the wake of the country's 2002 default.

The 2nd U.S. Circuit Court of Appeals in New York denied a motion to lift a stay it issued in favor of Argentina pending U.S. Supreme Court review of a ruling for the holdout bondholders in August.

The request to lift the stay was made Oct. 15 by bondholders led by hedge funds NML Capital Ltd, a unit of Elliott Management Corp, and Aurelius Capital Management LP.

The case is one of many lawsuits filed by bondholders in the wake of Argentina's $100 billion sovereign default in 2002.

"The court's order confirms that the legal procedures pursued by Argentina are right and we ratify that Argentina will exercise its defense in all available judicial bodies", Argentinas Finance Secretary Adrian Cosentino said in a statement.

In two restructurings, creditors holding about 93 percent of Argentina's bonds agreed to swap out their bonds in deals that gave them 25 cents to 29 cents on the dollar.

But bondholders who did not participate in the restructurings, including NML and Aurelius, sued for full payment. The litigation was filed in New York under the terms of the bond documents.

In 2012, U.S. District Judge Thomas Griesa ruled Argentina had violated a clause requiring the equal treatment of creditors. The 2nd Circuit largely upheld that order in a decision that the U.S. Supreme Court recently declined to review.

As part of its October 2012 decision, the 2nd Circuit sent the case back to Griesa to clarify how the injunctions he had issued would function.

Griesa issued a new order last November that required Argentina to pay $1.33 billion into a court-controlled escrow account in favor of the holdout bondholders.

The 2nd Circuit upheld that decision, but stayed its impact pending a second appeal by Argentina to the U.S. Supreme Court.

After the 2nd Circuit's ruling, Argentine President Cristina Fernandez pitched a voluntary swap of foreign debt in exchange for bonds governed by local law. But Judge Griesa said last month the proposal would violate an injunction he had issued.

Following Griesa's latest order, NML and Aurelius asked the 2nd Circuit to lift its stay.

A three-judge panel denied that request on Friday. Representatives for NML and Aurelius and a U.S. lawyer for Argentina did not immediately respond to requests for comment.

The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.

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Comments (1)
GermanHoldout wrote:
Now what? Will the Argentine government show Goodwill and negotiate with the Holdouts?
Or laughing in his sleeve, and continues with the delay tactics?

Summarized the following could be a solution.

Argentina’s government and the holdouts make STILL THIS YEAR A BINDING AGREEMENT with´respect to the “time after” (end of the “Rights Upon Future
Offers (RUFO)clause) with the advantage that seizure risks and a technical
default would thus be immediately averted.
In Addition, an agreement with the Holduts may enable Argentina to readmit to capital markets and thus refinance the below payments to the Holdouts, without using reserves.

Concretely, following might be acceptable for the Holdouts and may be also for Argentina:

- on 01/01/2015 (end of RUFO) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015

– for the accrued interest between 2002-2015 Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Nov 01, 2013 4:15pm EDT  --  Report as abuse
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