Pari passu realpolitik (big news, and a goodbye)
The pari passu hearing is over and done and, as Anna Gelpern described, what a hearing it was. Perhaps most interesting was the panel's apparent openness to an alternative payment formula that wouldn't require Argentina to pay the full accelerated debt immediately. But it looked unlikely that such a compromise could be reached. The panel seemed unwilling to limit holdouts to payments equivalent to those received by exchange bondholders, and Argentina seemed unwilling to pay a penny more (and possibly not even that). That doesn't leave many options.
In an unusual move, the panel has reached out to break the impasse. It just entered an order requiring Argentina, by March 29, to specify "the precise terms of any alternative payment formula and schedule to which it is prepared to commit." In a sense, the order is an attempt to save face. The court clearly thinks Argentina should pay something, yet it is understandably hesitant to issue an order that Argentina will simply disregard. ("Not gonna happen," I think was the phrase used by Argentina'a counsel during Wednesday's argument...)
From start to finish, this case has involved a clash between one of the (perhaps the) most preeminent commercial courts, which hardly wants its credibility threatened by an openly defiant debtor, and a country determined, for its own political reasons, not to respect that court's judgments. Given the court's limited enforcement power in the sovereign context, that kind of clash calls for a negotiated solution. Yet as an institutional matter, courts aren't very competent at negotiating directly with the parties before them. Desperate times call for desperate measures, I guess... In any event, this is potentially big news, but only if Argentina is willing to budge a little. And if Argentina does budge, and the court enters an order imposing on NML whatever agreement the court strikes with Argentina, doesn't that seem an awful lot like a sovereign bankruptcy regime?
As a final note, this will be my last guest post for Credit Slips, though I'm happy to continue responding to comments on this or other posts. Thanks very much to Credit Slips for providing such a great platform for discussing matters related to sovereign (and other) kinds of credit.