Thursday, August 21, 2014

Argentina Bond Case Saga Continues Post-Supreme Court Ruling

As the Argentina bond saga continues post-U.S. Supreme Court opinion, Reuters reported that a federal judge (SDNY) today said that legislation proposed in the Argentine Congress allowing the government to resume payment to holders of bonds exchanged in a debt restructuring would be in defiance of a court order.

The hedge fund creditors that won the U.S. Supreme Court ruling that the Foreign Sovereign Immunities Act did not immunize Argentina from the post-judgment discovery of information concerning its extraterritorial assets, were not part of the exchange.

The Court was reviewing a Second Circuit ruling that the Republic of Argentina’s decision to pay only holders of the exchange bonds it newly issued, but not holders of its old bonds (including the plaintiff hedge funds), constituted a breach of the pari passu clause contained in the Republic’s 1994 Fiscal Agency Agreement. Based on that holding, the appeals court affirmed an injunction requiring Argentina to make a ratable payment to the plaintiffs in respect of the old bonds whenever it pays any amount due under the terms of the new exchange bonds.

In a second case connected to the Argentina bond issue, the Court declined to review the part of the Second Circuit holding that an equal treatment provision in the bonds barred Argentina from discriminating against the hedge fund bonds. Argentina’s extraordinary behavior was a violation of the particular pari passu clause found in the agreement, said the appeals court, a ruling left standing by the Supreme Court’s denial of certiorari.


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