UPDATE 1-U.S. top court agrees to hear Argentina bank subpoenas case

Fri Jan 10, 2014 3:36pm EST

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Friday agreed to consider a dispute over subpoenas in a case stemming from long-running litigation over Argentina's obligations to bond investors in the wake of its default on $100 billion in sovereign debt in 2002.

The court agreed to hear Argentina's appeal after an appeals court said a hedge fund could subpoena banks for information about the South American 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 2002 default. The repayment issue is the subject of high-profile litigation that could be headed to the high court in a separate case.

"Argentina is in open defiance of dozens of judgments of U.S. courts to pay American investors what it owes," said Theodore B. Olson, a lawyer for NML. "It's time for Argentina to stop trying to evade its obligations and to follow the law."

In the matter the court acted upon on Friday, the question is the narrower issue of whether NML could enforce subpoenas against Bank of America and Banco de la Nacion Argentina.

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

NML, a unit of billionaire hedge fund manager Paul Singer's Elliott Management Corp, is one of several bondholders that 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.

In the higher-profile case, the same appeals court declined in November 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.

A decision in the subpoenas case is expected by the end of June.

The case is Argentina v. NML Capital Ltd, U.S. Supreme Court, 12-842.

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Comments (1)
GermanHoldout wrote:
It would be helpful, if Argentina would not file a Supreme Court appeal against “pari passu” , but if , the US Supreme Court would reject it.

Argentina should rather sit down and negotiate an acceptabble solution with the Holdouts!

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!

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 higher.

President Kirchner (by the way a beautiful women) should solve the holdout problem!

President Obama and the IMF should help and talk to President Kirchner to end Argentina’s Horror-Default.

A reconciliation with the holdouts would improve Argentina’s ratings, initiate a firework of investments and also cheaper credits for argentine companies.

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) It is not much for the 3. largest economy in South America.

If Argentina and the holdouts made NOW A BINDING AGREEMENT with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO) clause in December 2014), seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.

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.

A swap from the defaulted old bonds to new bonds are unacceptable also for tax reasons. In Germany, for example, we would have to pay for new bonds 30% tax separately. That would mean an additionally haircut of ca. 30%.

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds . (without swapping from old to new bonds, also because of tax reason)

- at the latest, on 01/01/2015 (end of RUFO clause) 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.

Jan 10, 2014 5:22pm EST  --  Report as abuse
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