Sovereign Debt Update - May/June 2015

Author:Mr Mark Douglas
Profession:Jones Day

The long-running dispute over the payment of Argentina's sovereign debt, on which the South American nation defaulted for the second time in July 2014, continues to be particularly active. On April 6, 2015, Argentina appealed a March 12, 2015, order of the U.S. District Court for the Southern District of New York that blocked Citibank, N.A. ("Citibank") from processing scheduled interest payments on $2.3 billion of Argentine-law governed bonds issued as part of 2005 and 2010 debt restructurings. Argentina's appeal claims that the order improperly extended a 2012 injunction which barred Argentina from making interest payments on restructured bonds without also paying amounts owed to holdout bondholders. However, on March 20, 2015, U.S. district judge Thomas Griesa approved a stipulation between Argentina's holdout bondholders and Citibank that conditionally authorized Citibank's Argentine branch to make interest payments scheduled for March 31 and June 30 on the Argentine-law bonds. The judge also authorized Citibank to exit its custody business in Argentina. On April 7, 2015, Argentina asked Judge Griesa to hear a group of eight class actions filed by certain holders of the country's defaulted debt separately from the lawsuits brought by hedge fund holdouts who acquired their bonds at a discount after Argentina defaulted on its debt in 2001. Argentina asked Judge Griesa to deny a request by the non-hedge fund classes to consider their cases along with dozens of what are referred to in the bond dispute as "me-too cases." Both bondholder groups are seeking the benefit of Judge Griesa's 2012 rulings blocking Argentina from paying holders of its restructured debt until it pays $1.7 billion owed to the hedge fund holdouts. On April 7, 2015, the U.S. Court of Appeals for the Second Circuit dismissed an appeal by Argentina of Judge Griesa's October 3, 2014, order holding the South American nation in contempt for violating his 2012 injunction preventing the country from making payments on restructured...

To continue reading