Wednesday, April 13, 2016

US appeals court rules for Argentina on debt injunctions

A US appeals court today cleared the way for the lifting of injunctions that prevented Argentina from paying off some debts, a ruling the country sought after agreeing to settle litigation by creditors suing over defaulted bonds.

The 2nd US Circuit Court of Appeals in New York ruled after hearing arguments from bondholders opposed to giving any relief to Argentina, which contends that vacating the injunctions is a crucial step in settling the litigation.

Argentina, which under newly elected President Mauricio Macri has sought to resolve litigation spilling out of its $100 billion default in 2002, had pushed for a swift ruling as it tried to raise funds to pay for over $8 billion in settlements.

Argentina also faces a Thursday deadline to pay its four biggest creditors, including Elliott Management's NML Capital Ltd and Aurelius Capital Management, which can terminate $4.65 billion in settlements if no payment occurs by then.

Lawyers for NML and Aurelius said their clients would not terminate the agreements on Thursday and could wait a little longer. But they urged the 2nd Circuit to not lift injunctions that had given them leverage against Argentina.

"Argentina's feet need to be held to the fire," said Matthew McGill, NML's lawyer.

Argentina offered to settle the litigation in February and soon after asked US District Judge Thomas Griesa to vacate injunctions that prevented it from servicing its restructured debt until it paid the suing bondholders.

Those creditors spurned its 2005 and 2010 debt restructurings, which resulted in 92 percent of its defaulted debt being swapped and investors being paid less than 30 cents on the dollar.

Griesa on Feb. 19 issued a ruling indicating he would vacate the injunctions, provided Argentina repealed two laws concerning its debts and paid creditors who by Feb. 29 reached settlements.

Griesa formalized his ruling on March 2. Since then, both houses of Argentina's legislature have voted to lift the two debt laws.

On appeal, creditors argued Griesa's ruling was based on a coercive plan by Argentina to force settlements and would too quickly would lift injunctions that took years to obtain.

Holdout creditors including NML and Aurelius had urged the 2nd Circuit to reverse Griesa, saying Argentina should not be allowed to obtain even conditional relief by claiming a willingness to settle.

The US government backed Argentina on appeal, saying it supported "a swift resolution to this long-running litigation."