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Waiting for RUFO

posted by Mark Weidemaier

It looks like much of December will be spent sitting around the RUFO sickbed, waiting for the clause to expire of natural causes on December 31. The clause, recall, prevents Argentina from "voluntarily" giving holdout creditors a better deal than the one given to restructuring participants. When the RUFO clause expires, we will see whether country officials viewed it as a serious barrier to negotiation or, rather, as a convenient excuse to justify their refusal to negotiate.

In the interim, however, there are some potentially interesting developments on the horizon:

The litigation in London: A group of bondholders holding euro denominated exchange bonds have sued BNY Mellon in London. Among other things, they want declarations that BNY Mellon holds funds for them in trust governed by English law and that "an order of a foreign court is ineffective" in varying their rights under that trust. In November, the judge in that case entered an order that seemed to indicate openness to granting this relief. (See paragraphs 20-30 in particular). But the judge thought it would be better to invite the holdout creditors to participate in the case first.

Well, the holdouts send their regrets. In a letter directed to counsel for the euro bondholders rather than to the court (the better to make clear that the holdouts do not submit to the jurisdiction of the English courts), the holdouts nevertheless state their case. Perhaps their most potent argument is that the euro bondholders have fully participated in the New York litigation and are therefore bound by Judge Griesa's orders. We will see whether this changes the judge's mind. A hearing is scheduled for December 17-19.

Alter ego litigation: NML is still trying to enforce money judgments against Argentina, most notably by seeking a declaration that Banco Central is Argentina's alter ego and can therefore have its assets seized to satisfy the country's debts. Judge Griesa refused to dismiss this claim despite an earlier Second Circuit ruling rejecting a similar theory, and the Second Circuit has just heard arguments on appeal. We're still in early days in this case, but it has potentially broad implications. If NML wins, for example, it might take another crack at Argentina's reserves at the Bank for International Settlements.

And then there's always Belgium...


And so it seemed RUFO expired without a whimper?

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