In her Aug. 19 speech, Argentina President Cristina Fernandez de Kirchner, said she was... Read More
U.S. District Judge Thomas Griesa said in Manhattan federal court today that the proposal, announced Aug. 19 by Argentina President Cristina Fernandez de Kirchner, is “invalid, illegal and in violation of current court orders and injunctions.”
Griesa declined a request by lawyers representing investors holding Argentina’s defaulted bonds that he find the nation in contempt of court. The judge told lawyers for both sides that a contempt finding wouldn’t add to the prospects of a settlement between Argentina and its creditors.
“The thing that is of
paramount necessity is to have a settlement,” Griesa said. “There must be a settlement.”
Griesa called the lawyers to court on less than a day’s notice after attorneys for Paul Singer’s NML Capital yesterday asked for an emergency hearing on its request for a contempt finding. NML, which called Argentina’s plan a “grave affront” to the court, didn’t suggest the penalty it should face.
Local Law
In her Aug. 19 speech, Fernandez said she was introducing legislation to allow the government to swap its restructured debt for bonds that would be issued under local law and paid through a government-controlled bank. The move would violate orders by Griesa that require Argentina to pay NML and the other holdouts more than $1.5 billion when it pays holders of its restructured debt.NML’s request comes as Griesa grapples with the legal fallout from Argentina’s latest default, the second in 13 years. The judge, who has presided over lawsuits springing from Argentina’s 2001 default for more than a decade, had said that any plan to pay investors outside his jurisdiction would put Argentina in defiance of U.S. law.
Argentina defaulted on a record $95 billion of debt in 2001. Holders of about 92 percent of the debt agreed to exchange their bonds for new ones, at a loss of about 70 percent, in debt restructurings in 2005 and 2010. Holdouts including NML sued, seeking full payment.
Griesa ruled that Argentina’s bond contracts required it to treat the holdouts and holders of the restructured bonds equally and that Argentina was required to pay the NML-led group in full when it made a payment on the restructured debt.
The ruling was upheld by a federal appeals court. In June, the U.S. Supreme Court declined to hear the case, setting the stage for Argentina’s default last month.
The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).
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