With Argentina in default, the pari passu saga has become a long, ludicrous, gruelling standoff — which plenty of financial institutions and Argentina’s restructured bondholders have been trying to escape.
And then running smack into the US court system.
On Friday the Second Circuit Court of Appeals dismissed an appeal by Citibank to get local-law, US dollar-denominated restructured bonds (the ones with the ISIN confusion) out of the pari passu embargo:
The Republic of Argentina and Citibank, N.A. appeal from the July 28, 2014 order (the “Order”) of the United States District Court for the Southern District of New York (Griesa, J.) clarifying that certain bonds issued by the Republic of Argentina are Exchange Bonds subject to the district court’s Amended February 23, 2012 Order.We decline to find jurisdiction because the Order appealed from is a clarification, not a modification, of the Amended February 23, 2012 Order. See Weight Watchers Int’l , Inc. v. Luigino’s, 423 F.3d 137 (2d Cir. 2005). However, nothing in this Court’s order is intended to preclude Citibank from seeking further relief from the district court.
And yes, that is a case about Weight Watchers being cited in the sovereign debt trial of the century.
This is an important decision. Not just because Citibank risks being on the receiving end of Argentine government pique when the next set of local-law restructured bond payments doesn’t go through.
The principle being hardened here is that it is OK for courts to block payments on non-US law bonds when the sovereign paying them has agreed to US jurisdiction elsewhere in its external indebtedness.
Holders of Argentina’s euro-denominated, English-law restructured bonds have also been trying to appeal to the Second Circuit, rather urgently: the Second Circuit’s schedule shifts to a new term soon, so delay might add months to a decision, while the Euro Bondholders are also suing in Belgian and English courts. But if the principle applies to their bonds, the complaints about extraterritorial enforcement of sovereign debt will get louder. Though quietly, restructured bondholders increasingly might decide on other ways around US jurisdiction, like changing their trustee.
More to the point — a local-law restructured bond embargo blows up Argentina’s offer of a local-law bond swap on the defaulted New York-law paper. Not that this was particularly popular in the first place.
Either the government takes the fight to the district court again, or bondholders consider the trustee option — or we go on waiting.
Keine Kommentare:
Kommentar veröffentlichen