CORRECTED-Brazil, Mexico, France to back Argentina in bonds case in U.S. court

Fri Mar 21, 2014 5:04pm EDT

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(Corrects 3rd paragraph to say France previously supported Argentina in Supreme Court, not lower courts)

By Lawrence Hurley

WASHINGTON, March 21 (Reuters) - Brazil, France and Mexico are expected to file papers in the U.S. Supreme Court on Monday backing Argentina in its legal battle with bondholders who refused to take part in debt restructurings from the country's 2002 default, according to a source familiar with the litigation.

Lawyers for the three countries will support Argentina's request that the high court review a court order requiring it to pay $1.33 billion to "holdout" creditors led by hedge funds Aurelius Capital Management and NML Capital Ltd, a unit of billionaire Paul Singer's Elliott Management Corp.

France had previously supported Argentina in an unsuccessful attempt last year to obtain Supreme Court review at an earlier stage of the legal fight.

The litigation has created concerns about a potential debt crisis. Argentina defaulted on $100 billion more than a decade ago.

The case is being closely watched because of its potential impact on future sovereign debt restructurings.

If justices on the top U.S. court agree to hear the case, a decision could come between October, when the next term begins, and June 2015, the end of the term.

Creditors holding about 93 percent of Argentina's bonds agreed to participate in the two previous debt swaps in 2005 and 2010, which gave them 25 to 29 cents on the dollar.

The case is Argentina v. NML Capital, U.S. Supreme Court, 13-990. (Reporting by Lawrence Hurley; Editing by Howard Goller and Tom Brown)

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Comments (1)
GermanHoldout wrote:
It is shameful, that countries such as Mexico, Brazil,
France and a Nobel laureate Joseph Stiglitz support this incredible
injustice of the non-payment of debts to the holdouts with
hair-raising justifications in their amicus briefs.

In the “Pari Passu” issue the Holdouts are 100% right! There is nothing to
discuss. In the bond contracts “Pari Passu” is clear defined. Also, in the bond
contracts Argentina has explicitly waived its sovereign immunity.

It would be helpful, if the US Supreme Court promptly rejected Argentina’s
unjustified appeal.

The argument:->

“If the U.S. courts uphold the Holdout’s position, as negative consequences
, Sovereign debt restructurings will be virtually impossible in the future.”

is NOT TRUE because, after Argentina’s 2001 Default all bonds imply the
Collective Action Clause (CAC) A collective Action clause (CAC) allows a
supermajority of bondholders (75%) to agree to a debt restructuring that is
legally binding on all holders of the bond, including those who vote against
the restructuring.

BUT, This CAC is NOT implied in Argentina’s repudiated old bonds!

Accordingly, Argentina MUST fulfill the bond contracts and repay the debt
to the holdouts!

Also the Argument-> “The country has said that forcing it to pay
the defaulted bondholders immediately would expose it to $43 billion in
additional claims it can’t pay and trigger a new default. ”

is NOT TRUE, because the clause “Rights Upon Future Offers (RUFO)” ends in
December 2014. That means, that from 01/01/2015 Argentina can make a better
offer to the Holdouts, than it made in 2005 and 2010. Hence, additional claims
from Exchange bondholders are completely ruled out.

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

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

Argentina should solve not only the Repsol and Paris Club but also the
Holdout Problem!

We are in contrast to Repsol and Paris Club human beings!

To reach an agreement with the holdouts would probably take only few hours…

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

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

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

President Kirchner (by the way a beautiful women) should end this since
2002 ongoing HORROR-Default and solve the holdout Problem NOW!

The cause of Argentina’s decline is the largest financial crime in world
history, this since 2002 ongoing HORROR-Default.

U.S. Senators Rubio and Menendez meant under undemocratic Argentina, that
Argentina does not pay its debt.

Non-payment of debt since 2002 to the Holdouts, breaching of bond-contracts
are criminal and are highly undemocratic!

Argentina as a great country must reenter the world!

For reentering the world, Argentina must end this HORROR-Default!

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. That is why we cannot accept
similar offers as they were in 2005 and 2010. Most of the “Exchange
Bondholders” were “after default buyer”, who have bought their bonds at an
average of 30% or even lower. That is why they have accepted the offers in 2005
or 2010.

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

The “Lock Law” ends as of 12/31/2014. (End of the “Rights Upon Future
Offers (RUFO) clause in December 2014.) That means, that from 01/01/2015
Argentina can make a better offer to the Holdouts, than it made in 2005 and

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

A swap from the defaulted old bonds to new bonds is unacceptable also for
tax reasons. In Germany, for example, if you accepted a swap, then you would
have to pay for the new bonds 30% extra tax…

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.

Mar 22, 2014 6:05am EDT  --  Report as abuse
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