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NML et al Decline Argentina's Offer ... and Ratable, Elaborated

posted by Anna Gelpern

Surprise, surprise -- NML and colleagues would just as soon pass on Argentina's offer of 2010 restructuring terms. Plaintiffs' submission (ahead of schedule) is full of the sort of language I love to learn in this case and deploy on disobedient children: "plainly believes rule of law does not apply to it ... predictably and characteristically defiant ... fails completely ... astoundingly ... has the temerity to claim ... manifests yet again its contempt ... unyielding disregard for the law ..." All this in the first few pages of the filing.

Nothing astounding about this rejection. But one point in the filing is quite intriguing: the plaintiffs explain how one should deal with the prospect of future plaintiffs with the same rights as these coming to claim their own ratable payment, but finding the till empty:

Accordingly, the only amount Argentina would pay as a result of this Court affirming the district court’s Injunction is $1.47 billion, which is a mere fraction of what Argentina paid to the Exchange Bondholders in December 2012 alone. If holders of other defaulted indebtedness later bring equal treatment claims of their own, Argentina will have ample opportunity both to litigate the merits (taking into account any factors that may distinguish those bonds from the ones at issue here, including different contractual language and governing law) and to make a showing of financial need, based on circumstances then prevailing, for the district court to consider in shaping a remedy. [Emphasis in the original.]

In other words, if a sovereign borrower from Tom, Dick, and Harry pays Tom and is sued by Dick on the ratable payment theory, the borrower has to pay Tom and Dick ratably. If Harry happens to be asleep and forgets to sue, that is Harry's loss--especially so if by the time Harry wakes up, the borrower is out of money. There you have it, equitable debt collection outside bankruptcy.

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