An US appellate court has rejected the ‘inflated payments’ calculated by US district judge Thomas Greisa as part of a ruling to secure payments for bondholders of Argentine debt.
Greisa issued a restraining order to freeze over US$2.2 billion in Argentine government assets held by Argentina’s Banco de la Nación on Thursday, and set awards ranging from US$95.3 million to US$543.9 million to be paid to eight plaintiff class-action groups holding defaulted bonds from the country’s 2002 financial crisis.
The US second circuit court of appeals in Manhattan has ordered Griesa to determine payouts using an alternative method that ‘more closely’ reflects the losses experienced by the plaintiffs. However, the appeals court rejected Argentina’s request to deny investors class-action status, which would have made it more costly for smaller investors to take legal action.
Proskauer Rose LLPis co-lead counsel for the investors, along with Miami-based firm Diaz Reus & Targ LLP and independent practitioner Howard Sirota. Cleary, Gottlieb, Steen & Hamilton LLP is representing Argentina.
‘This will have zero affect on our clients,’ says Diaz Rues partner Michael Diaz, commenting on the appeal. ‘The appellate court confirmed the class certification, which was one of the very important issues that Argentine tried to attack. They wanted at all costs to avoid a class-certification, because that would mean less of a payout to bondholders to whom they defaulted. A class-action will mean they will have to give to the bondholders a much bigger pay check.’
Cleary Gottlieb was unavailable for comment.
The ruling is the latest in a series of lawsuits launched against the country over the last seven years, following Argentina’s 2002 debt default totalling US$100 billion. Over US$18 billion is been sought by investors who did not participate in Argentina’s 2005 debt swap package.
A new debt-restructuring package is currently being negotiated, with Marcelo Etchebarne from Argentina’s Cabanellas, Etchebarne, Kelly & Dell’Oro Maini Abogados leading the negotiations with Linklaters on behalf of Barclays, the bank coordinating the deal. But some of the lawyers representing bondholders have said they have little confidence in the terms of the swap.
According to Diaz the main failing of the debt package, is ‘the ability of Argentina to change the rules and payouts after bondholders have agreed to participate .’
The cases against Argentina have prevented the country from trading on world capital markets. In 2004, the bondholders launched litigation proceedings against Argentina for payment of eight series of defaulted global bonds and accumulated interest, and won a series of judgments on their behalf. The parties will next meet in court on 8 June.