U.S. supports Argentina over subpoenas against banks

WASHINGTON Fri Dec 6, 2013 11:14am EST

WASHINGTON Dec 6 (Reuters) - In the latest twist in long-running litigation over Argentina's obligations to bond investors, the U.S. government has asked the Supreme Court to intervene over a hedge fund's effort to gain information about the country's non-U.S. assets.

The hedge fund, NML Capital, a holder of Argentine bonds, wants repayment in full in a fight that was prompted by Argentina's default on $100 billion in sovereign debt in 2002. That is the subject of high-profile litigation that could be headed to the high court in a separate case.

But in the different case in which U.S. Solicitor General Donald Verrilli filed a brief this week, the question is the narrower issue of whether NML could enforce subpoenas against Bank of America and Banco de la Nacion Argentina seeking information about Argentina's non-U.S. assets.

In August 2012, the 2nd U.S. Circuit Court of Appeals in New York rejected Argentina's argument that the subpoenas should be quashed because it would infringe on its sovereign immunity.

Verrilli said in his brief that the appeals court "erroneously permitted blanket discovery into a foreign state's assets located outside the United States."

NML, a unit of billionaire hedge fund manager Paul Singer's Elliott Management Corp, is one of several bondholders which rejected offers accepted by other investors to swap the defaulted debt for new paper at a steep discount. The other major player is Aurelius Capital Management.

Last month, in the more high-profile case, the same appeals court declined to reconsider an order requiring Argentina to pay $1.33 billion, ruling in favor of the bondholders. Argentina is now expected to seek a Supreme Court review in that case.

The case in which the U.S. government filed the brief this week is Argentina v. NML Capital Ltd, U.S. Supreme Court, 12-842.

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Comments (1)
GermanHoldout wrote:
Mandela has taught reconciliation. Even Argentina, President Kirchner should be reconciled with the holdouts after more than a decade.

President Obama should help to end Argentina’s Horror-Default. He should not help Argentina furthermore to block the decision of the U.S. Courts repaying the debt to the Holdouts.

President Kirchner, (by the way, a beautiful women) should not have a cold heart for holdout creditors, but she should solve the Holdout problem. Then, everything would be good again.

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

President Kirchner should show goodwill and finally offer an ACCEPTABLE solution also to the Holdouts!

Argentina clearly HAS the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion (incl. accrued interest) to the holdouts. It is not much nothing for the 3. largest economy in South America.

Argentina and the holdouts should make NOW 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.

Then, Argentina could immediately return to the capital market and thus Argentina could refinance the below payments to the holdouts, without using reserves.

Beyond the U.S. Hedge Funds there are still tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even over.

Probably, also the US Court wants negotiations, thus the US. Court yet left the “stay” to give time for negotiations.

Holdouts want a simple, clear, secure and an ACCEPTABLE solution.

Holdouts do not want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc., and with maturities in the eternity.
Such “shares like” financial constructs are inacceptable.

Following simple conditions might be acceptable for the Holdouts .

- at the latest, 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.

Dec 06, 2013 3:14pm EST  --  Report as abuse
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