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Fargo (No, not North Dakota -- Argentina)

posted by John Pottow

Just a heads up for another interesting international decision out of the Southern District of New York. Here, Chief Judge (Stuart, not Stan) Bernstein booted an involuntary petition opened against Fargo by some creditors who were unhappy with how things were unfolding in the Argentine "concurso" of Fargo, which is Argentina's largest commercial producer of bread and bread products. It's a fun story, involving an Argentine appellate court that may have been out in left field ("Indeed, Fargo has conceded certain procedural irregularities, and its own expert has acknowledged that the appellate ruling suffers from 'flaws.'") Basically, the aggrieved parties who want to move things Stateside are bondholders who were surprised to find that the Argentine appellate court, in ostensibly resolving the question whether the face value or market value of their notes should determine their claims and voting purposes, decided to value their claims based on neither and instead, adopting a position advocated by neither party, set their voting rights based on only the unpaid interest of the notes(!).

Anyway, there was a two-year back and forth with the Argentine Supreme Court and it appears that the noteholders basically got fed up and filed an involuntary 11 in SDNY. In exercising rights to dismiss the petition under § 305(a)(1), Chief Judge Bernstein  noted that other than the bondholders, all the players were in Argentina, that all the property save a trademark or two was held in Argentina, and that a hypothetically confirmed chapter 11 plan would have little effect, other than reddening the face of an Argentine judge when asked for recognition, and that the creditors were all participants (albeit unhappy ones) in the Argentine proceeding. As for the suggestions that the Argentine commercial judiciary is corrupt and that the peculiarities of Argentine insolvency law were public-policy-offensively different, he (rightly) brushed them aside. (I'm not even getting into the greenmailing sub-plot.)

Seeing the writing on the wall, the creditors asked that rather than dismiss the petition, the court should only suspend it, which would leave in place the U.S. stay and allow, in effect, Judge Bernstein to "take another look at the the progress in Argentina in the future. In other words, they want me to oversee the Argentine bankruptcy. []I decline the invitation. The automatic stay is not an end unto itself,  but a protection a debtor gets to allow it to reorganize." (He also noted the irony that the stay-favoring creditors had violated the Argentine stay by filing the involuntary 11!)

I see this as another good opinion taking a pragmatic and principled approach to cross-border insolvency. Perhaps a more technically literate reader will post a link to the opinion...

UPDATE (11/28): A copy of the opinion is now available here.

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