Wednesday, September 4, 2013

NML Capital vs. Argentina – “Argentina breached its promise of equal treatment.”

In February, I have written about this litigation. A few days ago, on August 23, the US Court of Appeals has confirmed Argentina’s obligation to pay its creditors under bonds restructured in 2005 and 2010.

On the merits, Argentina’s arguments are dismissed as follows:

  • Violation of state immunity in the US: Since Argentina can pay with any financial resource, not only a specific US financial resource, there is no such violation.
  • Former bondholders could, at most, receive amounts pro-rata to those amounts paid to new bondholders: No, as per contractual obligation, the full amount is now due to former bondholders.
  • Obligations are inequitable vis-à-vis new bondholders: No, they knew that not every creditor was participating in the restructuring.
  • Violation of parties participating in the payment system for Argentina’s bonds: No – In my view, this rather technical discussion covers an argument which is clearly out of scope.
  • Harmful consequences for the capital markets and the global economy, especially if Argentina would again default on its debt: No, this argument is speculative and not supported by sufficient evidence.
  • The ruling would imperil future sovereign debt restructurings: No, Argentina’s case is unique and today’s collective action clauses in sovereign bond issues avoid the problem of former creditoars’ claims.
The story is not finished yet. Argentina has already requested a US Supreme Court ruling...