NML v. Argentina: No love for exchange bondholders
Anna Gelpern has already posted on the pari passu wipeout of Argentina. As she noted, NML got pretty much everything it wanted. By contrast, the exchange bondholders got no love whatsoever. The district judge dismissed their argument that it was unfair for NML to get 100 cents on the dollar when they had received only 30. In essence, the judge replied that exchange bondholders, unlike NML, lacked the stomach for a decade of litigation and so shouldn't complain. This may be true, but it seems puzzlingly disconnected from the realities of most sovereign restructurings. Sure, successfulholdouts tend to be specialized investors with long time horizons and a fair appetite for risk. (There are of course other holdouts who don't meet this description.) But in general, holdouts recover 100 cents on the dollar only because other creditors agree to take less. If everyone had the stomach for a decade of litigation, it's likely that no one would recover in full.
Another interesting thing about the district judge's opinion is that it doesn't really engage with any of the more substantive legal arguments made by the exchange bondholders. This is in part due, I'm sure, to the judge's desire to rule quickly, and also to the limited scope of issues on remand. So we'll see, I guess, whether their arguments get taken any more serioulsy by the Second Circuit. As Anna says, it's getting increasingly hard to see the Second Circuit making major changes at this point.