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Argentina's Settlement Negotiations and Lifting the Injunction

posted by Mark Weidemaier

Shutterstock_286798478Argentina faces a complicated task in settling with its remaining holdouts, but there has been recent progress. The country has agreed to settlement terms with a large group of Italian bondholders and, most recently, several US hedge funds. The remaining barrier to complete resolution is the same as the old barrier: Elliott's NML Capital and assorted other holdouts. Bloomberg has two good explanations of the remaining issues here (by Katia Porzecanski and Chiara Vasarri) and here (by Matt Levine). The short version is that NML cleverly bought a subset of Argentine bonds that accrue pre-judgment interest (on principal) at extraordinarily high rates. Because of this, the settlement terms offered by Argentina are less favorable to them than to other holdouts. Elliott et al.'s rejection of Argentina's proposed settlement has prompted some speculation that Judge Griesa might be tempted to lift the injunction (thereby pressuring the remaining holdouts to compromise). 

That scenario might become plausible, but it isn't right now. The court can't modify or eliminate the injunction on a whim; the law requires a significant change in the underlying legal or factual circumstances. And so far, the only thing that has changed is that Argentina has made a settlement offer that some creditors have deemed acceptable. The remaining holdouts' reasons for rejecting the offer aren't exactly noble, but they aren't exactly unusual either. It's pretty standard fare for a litigant to take the position that its claims merit more significant compensation than has been offered. Perhaps if the remaining holdouts demonstrate a complete unwillingness to negotiate or compromise, then Argentina (with the tacit support of the special master) might look to the judge for leverage. But we're a long way from that point. It seems increasingly likely that a settlement will be reached--but not, I suspect, through such explicit intervention by the court.

*Settlement image from Shutterstock.


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