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News of the Obvious: NML et al. Oppose the Stay

posted by Mark Weidemaier

Yesterday's post noted that, by asking Judge Griesa to re-impose a stay of the injunction, Argentina was effectively asking for permission to pay exchange bondholders on June 30 without making any payment whatsoever to NML and the other plaintiffs. Not surprisingly, plaintiffs oppose the motion. (Here's their response.) The parties held a telephone conference today with the judge, so I would expect a ruling soon.

Argentina needs time to fashion a global resolution that will encompass potential "me too" claimants. But after years of litigation (and a stay of more than two years), extra time may not come for free. As I suggested in an earlier post, if Argentina needs more time and wants to avoid default on the exchange bonds, it might need to pay plaintiffs to extend the stay. In their response to Argentina's stay request, Plaintiffs also raise this possibility, noting that any agreement would have to "provide Plaintiffs with suitable protections and compensation for the risk that the settlement effort will fail." So, we will see. I am skeptical that Judge Griesa will grant the stay, and even more skeptical that he will grant it without imposing any conditions. At this point, he has every reason to keep the pressure on Argentine officials so as to give urgency to the settlement talks. If a stay proves necessary, and the parties cannot agree to one, he can always reconsider his decision. Conceivably, he might even condition a stay on Argentina providing some compensation to plaintiffs. That would raise interesting questions under the Foreign Sovereign Immunities Act - since the order would condition relief on Argentina's parting with immune assets - but I don't think it is obviously beyond the scope of the judge's power. 


Thursday update. About an hour after the Economy Minister announced that the funds for the June 30 interest payment on the restructured notes had been deposited with the payment banks, Judge Griesa in New York published his decision not to lift the stay on the judgement granted to the holdouts as requests by The Republic as a condition for negotiating. Apparently most if not all of the payment was made by a transfer into the accounts of the payment banks with the Central Bank of Argentina, which cleverly keeps the money out of reach of the vultures. There is optimism with the help of the Special Master, a resolution will be agreed before the expiration of the interest payment grace period at the end of July. Restructed bond prices are there multi year highs. Surprisingly, despite Kicilof saying a default now would be worse than the horrors of 2001, in Argentina there has not been a panic run from pesos into dollars --evidence the "blue" market exchange rate holding well below its top.

Perhaps someone can explain why the restructured bond holdes are willing to see the holdouts get a much better deal. Why arent they in Giesa's courtroom demanding pari pasu with whatever is paid to the holdouts?

Their pari passu rights are defined (differently, it can be argued) in the trust indenture. But even if interpreted in same way, the pari passu clause entitles exchange bondholders to be paid rateably with respect to any amounts due them. Payment of 100% of NML's claim wouldn't be a pari passu violation as long as exchange bondholders get 100% of the (much lesser) amount they are owed. It would be entertaining, however, to see other holdouts sue to enjoin any payment made to NML as a violation of their right to pari passu treatment.

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