Argentina ‘Me Too’ Bondholders Found to Be Treated Unequally

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Holders of $5.4 billion in defaulted Argentine debt won a ruling that they weren’t treated equally with owners of restructured government bonds, another legal setback for the nation in its long-running showdown with creditors.

U.S. District Judge Thomas Griesa in Manhattan ruled Friday that Argentina violated an equal-treatment provision in its contracts with hedge fund and individual bondholders in 36 cases by refusing to pay them while it made regular payments to holders of the country’s restructured debt. Griesa oversees lawsuits over Argentina’s defaulted debt,

The decision increases pressure on the South American nation, which has been locked out of international debt markets since its $95 billion sovereign debt default in 2001, to reach an agreement with its creditors.

Griesa in 2012 agreed with a group of hedge funds led by Paul Singer’s NML Capital that Argentina should be blocked from paying holders of the restructured bonds unless it also pays them the $1.7 billion on their defaulted bonds. The ruling forced Argentina into a new default when it took effect last year.

The ‘me-too’ bondholders argued that the 2012 ruling should also be applied to their claims.

Equal Protection

In his Friday ruling, Griesa rejected the nation’s arguments that it didn’t violate the equal protection provisions. He also rejected Argentina’s argument that bondholders in 19 of the cases, who already hold court judgments for the amounts they’re owed, can’t seek additional legal relief from the court.

“The Republic violates this provision not simply by its refusal to pay plaintiffs, but by its creation of and payment on a superior class of securities and by subordinating its obligation to plaintiffs,” Griesa said in a written opinion.

Argentina said in a statement that it planned to appeal the ruling, saying it seeks to reach a deal with 100 percent of creditors under fair, sustainable and equal conditions.

The lead case is NML Capital Ltd. v. Republic of Argentina, 14-cv-08601, U.S. District Court, Southern District of New York (Manhattan).

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