Argentina Bonds Judge Rebuked in Rare Court Win for Nation

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The judge overseeing lawsuits arising from Argentina’s 2001 default received a sharply worded reversal of a ruling that favored bondholders, in a rare courtroom win for the South American nation.

The U.S. Court of Appeals in New York Monday ordered U.S. District Judge Thomas Griesa to hold a hearing on whether damages can be set for a group of bondholders who have held the debt continuously. If damages can’t be determined for the group, bondholders may have to pursue their claims individually.

The appeals court ruling narrows the lawsuit because fewer investors may be able to recover through the group suit. Debt is often bought on a secondary market -- in the case of defaults at a steep discount. The suing bondholders convinced Griesa in 2014 that a damages trial wasn’t needed if he included all holders of outstanding bonds, despite an earlier ruling from the appeals court ordering the hearing.

It’s the third time the appeals court has rejected Griesa’s determination of who may recover and how much.

“We provided explicit instructions conclusively addressing the matter,” U.S. Circuit Judge Chester Straub said on behalf of a three-judge panel. The earlier ruling “cannot be read to have permitted the district court to disregard our instructions.”

The ruling is a rare win by Argentina in U.S. courts. Last year, the U.S. Supreme Court let stand a ruling by Griesa blocking Argentina from making payments to holders of its restructured debt before paying $1.7 billion to a group led by Paul Singer’s NML Capital. The high court’s decision not to hear the case triggered a new default on Argentina’s performing debt.

Double Recoveries

In the eight cases, which were filed in 2004, Griesa faced the problem of how to make sure the classes didn’t include investors who had other pending cases and might get double recoveries, had bought or sold their bonds on the secondary market during the class period or had exchanged their bonds in the nation’s 2005 and 2010 debt restructurings.

In 2005, Griesa certified “continuous holder” classes, which were limited to bondholders who had purchased bonds before the lawsuits were filed and held them until the court ruled on the claims.

Argentina defaulted on a record $95 billion of sovereign debt in 2001 and has spent the past 14 years fighting attempts by various parties to recover what they’re owed. The nation had earlier asked the appellate panel to limit investors who could join the group lawsuit.

The appeals case is Puricelli v. Republic of Argentina, 14-2104, U.S. Circuit Court of Appeals for the Second Circuit (Manhattan).

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