Gesamtzahl der Seitenaufrufe

Sonntag, 15. September 2013

Grenada Is Not Argentina

Grenada Is Not Argentina

Grenada Is Not Argentina

Text   

Some in the financial markets have had mixed reactions to the U.S. Court of Appeals for the Second Circuit’s NML Capital, Ltd. v. Republic of Argentina decision, which required Argentina to treat all of its bondholders equally. On the one hand, they are happy that the decision prevents solvent debtors like Argentina from making take-it-or-leave-it demands to bondholders and refusing all payments to those who don’t knuckle under. On the other hand, some Cassandras warn that the decision’s protections for the rights of holdout bondholders will prevent nations facing financial crises from undertaking an orderly restructuring of their debts.
A decision handed down yesterday by a federal district court in New York, Export-Import Bank of China v. Grenada, should put to rest many of those concerns. The decision, issued in connection with claims against the island nation of Grenada, makes clear that the NML decision is limited to Argentina’s unique status as a deadbeat debtor willing to thumb its nose at its legitimate creditors. Mere nonpayment by sovereign nations acting in good faith, the court explained, will not trigger the sort of injunctive relief for bondholders that the Second Circuit upheld inNML.
Earlier this year, the Export-Import Bank of the Republic of China (“Ex-Im Bank”) filed suit against Grenada, seeking to enforce a pari passu clause in its loan agreement with the nation. In 2005, following financial setbacks caused by Hurricanes Ivan and Emily, Grenada sought to restructure its foreign debt. The Ex-Im Bank did not participate in the restructuring and instead obtained a court judgment on its debt. Since then, Grenada has made some interest payments on its restructured debt but has paid nothing to Ex-Im Bank. Apparently hoping to piggy-back on the NML decision, Ex-Im sought an injunction against any further interest payments to holders of Grenada’s restructured debt unless payments were also made to Ex-Im Bank.
The district court yesterday denied Ex-IM’s motion for judgment on the pleadings, explaining that the NML injunction had been based on a unique set of circumstances. Argentina did not merely fail to make payments to some bondholders while making interest payments to others; it also took numerous executive and legislative actions designed to ensure that, in direct violation of “equal treatment” promises it made as part of its pari passu clause, the debt held by disfavored bondholders would be effectively subordinated to debt held by other bondholders. Indeed, Argentina went so far as to adopt a “Lock Law” that prohibited all payments to bondholders who did not accept its take-it-or-leave-it restructuring offer, and to declare those bonds unenforceable in Argentina’s own courts.
The district court held that Ex-Im did not allege any similar conduct by Grenada. While noting that Grenada is alleged to have made occasional payments to other creditors since it stopped making payments to Ex-Im in 2008, the court held that Grenada’s payment history did not demonstrate anything approaching the sort of discriminatory treatment that gave rise to the NML injunction against Argentina. Indeed, the court noted that earlier this year Grenada announced that it did not have the resources to make even the interest payments on its bonds, and that it would seek once again to restructure its debts.
The Ex-Im Bank will still have an opportunity, following completion of pre-trial discovery, to attempt to prove that Grenada has engaged in same sort of discriminatory conduct that led the Second Circuit to uphold injunctive relief against Argentina. But yesterday’s decision should put to rest concerns that pari passu litigation may “go viral.” The court said that, even assuming that Ex-Im Bank could show that the pari passu clause agreed to by Grenada is as fulsome as the one at issue in NML – a doubtful assumption, based on my reading of the documents — Ex-Im could not obtain injunctive relief in the absence of a showing, similar to the one made against Argentina, that Grenada took steps to effectively block all prospect of future payment on Ex-Im indebtedness.
The disparate circumstances facing Grenada and Argentina undoubtedly played a role in yesterday’s district court decision. Grenada is a poor nation which is in arrears on all its foreign debt. Grenada is treating Ex-Im Bank and all other creditors the same; it’s not paying any of them. Argentina’s economy, on the other hand, is recovering nicely, and the Second Circuit determined that Argentina has more than sufficient foreign reserves to pay all its debts to bondholders. Argentina is not paying holdout bondholders because it chooses not to; as the district court recognized, Grenada is not paying Ex-Im Bank because, at least in the near term, it can’t.
Finally, one needs to remember that the federal courts did not enter injunctive relief until after having to endure nearly a decade of Argentina’s flat-out refusals to honor its debt obligations. Argentina’s infamous Lock Law prohibited treasury officials from paying so much as a penny to bondholders who were unwilling to accept the nation’s take-it-or-leave-it proposal of a 70 percent haircut. The patient approach that federal courts adopted for so many years in response to Argentinian intransigence is a strong indication that they will enforce equitable-treatment obligations imposed by pari passu clauses only after they become convinced that a sovereign debtor has abandoned all pretense of fairness among its creditors. Yesterday’s decision is one more indication that the federal courts will not allow holdout creditors to disrupt reasonable bond-restructuring efforts.
— Rich Samp is chief counsel for litigation at the Washington Legal Foundation.

http://www.nationalreview.com/bench-memos/356463/grenada-not-argentina-rich-samp

Freitag, 23. August 2013

Argentina’s pari passu upset — redux

Argentina’s pari passu upset — redux

Got a problem with Argentina being made to pay holdouts alongside its restructured bondholders?
Reckon it might happen to your sovereign (even if Argentina is apparently a “uniquely recalcitrant” debtor) and screw up its next debt restructuring?
Deal with it, says the Second Circuit of the United States Court of Appeals:
We can see that direct warning to redraft pari passu clauses being taken.
That’s the court dispatching all the wider fears about the pari passu saga and sovereign debt restructuring on Friday — even as it finally declared that it won’t accept Argentina’s suggested alternative for paying the holdouts. (Hardly a surprise — Argentina’s plan was a debacle.)
Some quick takes as we read the opinion on Friday…
First and foremost, ratable payment is go:
As the district court concluded, the amount currently owed to plaintiffs by Argentina as a result of its persistent defaults is the accelerated principal plus interest. We believe that it is equitable for one creditor to receive what it bargained for, and is therefore entitled to, even if other creditors, when receiving what they bargained for, do not receive the same thing.The reason is obvious: the first creditor is differently situated from other creditors in terms of what is currently due to it under its contract…
Right now, though, the Second Circuit’s ferocity is neutered because at the same time it’s also stayed the order to pay holdouts, while the Supreme Court decides whether to accept Argentina’s petition to review the case’s impact on sovereign immunity. Since the earliest the Supreme Court can do that is September, Argentina’s restructured payments before then might be OK, which is why we expect Argentine bonds would rally now.
Then again, that’s not such a long time, and the Second Circuit’s given no quarter. Even the hint of dissent’s tinier than an actual dissent — it’s literally a footnote:
Judge Pooler disagrees with the majority decision to dismiss the appeals of EBG, Fintech, Euro Bondholders, and ICE Canyon. However, as the arguments of the dismissed appellants are treated as made by amici, and as the status of the non-appellants matters little to the outcome here, Judge Pooler has agreed to note her disagreement for the record in this footnote, rather than dissent…
Third parties
That hint of dissent is still interesting though, as the Second Circuit ended up giving practically no ground to any third parties (including Bank of New York and clearing-houses) involved in Argentina paying its restructured bondholders. They therefore face serious legal risk beyond the stay (or any Supreme Court dismissal). And the Second Circuit does it all in very punchy language:
This type of harm—harm threatened to third parties by a party subject to an injunction who avows not to obey it—does not make an otherwise lawful injunction “inequitable.” We are unwilling to permit Argentina’s threats to punish third parties to dictate the availability or terms of relief…
When it comes to the restructured holders, the court bluntly tells them that they should have read their own bond contracts — where Argentina apparently warned that holdout litigation might stop payments to them. It also says that “if Argentina decides to default on the Exchange Bonds… Exchange Bondholders would then be able to sue over that default“. (Emphasis ours.)
We sense that’s going to be cold comfort.
The court’s answer to third parties tied to the payments system itself is more technical in terms of the law (BNY’s interventions in this case in particular have been all about how civil procedure works) but no less sweeping:
BNY and Euro Bondholders argue that the district court erred by purporting to enjoin payment system participants over which it lacks personal jurisdiction. But the district court has issued injunctions against no one except Argentina. Every injunction issued by a district court automatically forbids others—who are not directly enjoined but who act “in active concert or participation” with an enjoined party—from assisting in a violation of the injunction…
The amended injunctions simply provide notice to payment system participants that they could become liable… if they assist Argentina in violating the district court’s orders.
Effectively the likes of BNY are being told to go back to Judge Griesa for clarification on whether the holdouts can file suit against them, the next time Argentina tries to pay restructured holders without paying NML et al, and without the stay in place. It’s very hard to see BNY sticking around for long as the trustee for the restructured bonds in these circumstances.
Even Argentina’s foreign-law bondholders — who have been up in arms, and ready to go to Belgian courts to effect a Mexican standoff with US judges over their right to be paid — get short shrift:
If ICE Canyon and the Euro Bondholders are correct in stating that the payment process for their securities takes place entirely outside the United States, then the district court misstated that, with the possible exception of Argentina’s initial transfer of funds to BNY, the Exchange Bond payment “process, without question takes place in the United States.”… But this possible misstatement is of no moment because, again, the amended injunctions enjoin no one but Argentina…
…We have never been presented with the question whether U.S. sanctions legally apply to non-U.S. persons or institutions, and we do not answer that question today. We merely note that both foreign and domestic financial institutions are already required to police their own transactions in order to avoid violations of potentially applicable United States laws and regulations…
Pari passu and the public interest
Ultimately the real fireworks are at the end though: it’s this question of precedent for sovereign debt restructuring, and whether ratable payment built on pari passu will now convince more bondholders to become holdouts at the margin. It’s slightly curious in that this stuff was never going to decisively sway the case one direction or the other.
Still, the Second Circuit comes over very defensive here:
Our decision here does not control the interpretation of all pari passu clauses or the obligations of other sovereign debtors under pari passu clauses in other debt instruments. As we explicitly stated in our last opinion, we have not held that a sovereign debtor breaches its pari passu clause every time it pays one creditor and not another, or even every time it enacts a law disparately affecting a creditor’s rights… We simply affirm the district court’s conclusion that Argentina’s extraordinary behavior was a violation of the particular pari passu clause found in the FAA.
Really? Actually we think that explicit statement is not all it appears. And that’s because the NML v Argentina legacy for the uses and abuses of pari passu has already begun to be litigated for other sovereigns.
After all, here’s a US district court judge holding forth in Ex-Im Bank v Grenada this week (basically to confirm that more work is needed in that case to see if Grenada’s been as “recalcitrant” a debtor as Argentina):
The fact is that in NML, the Second Circuit specifically left open the question of whether “a breach would occur with any non-payment that is coupled with payment on other debt . . . . [or] whether ‘legislative enactment’ alone could result in a breach” and chose to “simply affirm the district court’s conclusion that Argentina’s course of conduct here did.”
The Second Circuit didn’t explicitly state that pari passu breaches can be any time one creditor gets money and another doesn’t, that’s true — but they didn’t explicitlyrule it out either. They’ve now passed up another opportunity to clear it up. That could be a huge fissure in pari passu litigation going forward.
Lastly, the court once again points to collective action clauses as anti-holdout devices which will prevent another Argentina. Even if holdouts get enough votes to block a CAC, “a restructuring failure on one series would still allow restructuring of the remainder of a sovereign’s debt,” says the court. So is losing one series an acceptable level of violence for a restructuring? It’s an interesting question — Greece famously won massive, 90 per cent plus acceptance of its PSI last year through (local-law) CACs. But you still see huge anger over having to pay billions of euros in foreign-law bonds which failed to CAC.
Some are probably going to want to see that abortive IMF amicus brief eventually surface at the Supreme Court on these issues after all…

Sonntag, 10. März 2013

hier gehts Grenada pari passu mässig an den Kragen....


hier gehts Grenada pari passu mässig an den Kragen....


hier gehts Grenada pari passu mässig an den Kragen....


PLAINTIFF(S) ADDRESS(ES) AND COUNTY(IES)
The Export-Import Bank of the Republic of China
3 Nanhai Road, 8th Floor
Taipei (100) Taiwan
Republic of China

DEFENDANT(S) ADDRESS(ES) AND COUNTY(IES)
Grenada
Ministry of Finance
Financial Complex
Carenage, St. George's, Grenada


Paul E. Summit
Andrew T. Solomon
SULLIVAN & WORCESTER LLP
1633 Broadway
New York, NY 10019
(212)660-3000
Attorneys fo r Plaintiff/Judgment Creditor

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
THE EXPORT-IMPORT BANK OF
THE REPUBLIC OF CHINA,
-X
Plaintiff/Judgment Creditor,
-against-
GRENADA,
Defendant/Judgment Debtor.
-X
i l
Civil Action No:
COMPLAINT
Ca í
•'C
I
Plaintiff The Export-Import Bank of the Republic of China (“Ex-Im Bank”), by its-*7"

attorneys, Sullivan & Worcester LLP, complains of the defendant Grenada as follows^
• ••

JURISDICTION AND VENUE o '

I. This court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C.§ 1330.

2. Venue properly exists in this district pursuant to 28 U.S.C. § 1391(f), based upon
the residence and status o f the parties, the events and omissions giving rise to the claims, and the
agreement which provides the basis for this action.

3. In addition, Grenada irrevocably consented to the non-exclusive jurisdiction of
any State or Federal Court in New York, New York, to waive any objection to that venue on any
ground, and to accept service o f process by registered or certified mail to the notice address
provided in the agreements at issue.

THE PARTIES

4. Ex-Im Bank is a banking institution organized and existing under the laws of the
Republic of China, with its principal place o f business in Taipei, the Republic of China. The
business of Ex-Im Bank includes the lending of money internationally.

5. Grenada is a foreign state as defined in 28 U.S.C. § 1603(a).

BACKGROUND

6. Between 1990 and 2000, Ex-Im Bank and Grenada executed four loan agreements
by which Grenada borrowed a total o f $28,000,000 from Ex-Im Bank (the “Loan Agreements”).

7. On March 16, 2007, in an earlier action between the parties, Civil Action No. 06-
CV-2469(HB)(AJP), this Court entered an amended judgment in favor o f Ex-Im Bank and
against Grenada in the amount o f $21,586,057.38, plus pre-judgment interest, attorney’s fees and
statutory interest in connection with Grenada’s default on four multi-million dollar promissory
notes executed by Grenada in favor o f Ex-Im Bank pursuant to the Loan Agreements.

8. With post-judgment interest, Ex-Im Bank’s judgment against Grenada now stands
in excess of $32,000,000.

9. Almost six years later, Grenada has still not paid anything to Ex-Im Bank in
satisfaction o f the judgment.

10. Section 4.04 o f the Loan Agreement o f April 24, 1997 states, “Borrower’s
obligations under this Agreement and the Note will at all times rank at least pari passu with
Borrower’s any other External Indebtedness (direct or contingent) outstanding from time to
time.”

11. Section 4.04 o f the Loan Agreement o f October 1, 1997 has identical language.

12. Section 5.04 o f the Loan Agreement of July 27, 1990 has a materially identical
pari passu clause.

13. Section 5.01(d) of the Loan Agreement of January 21,2000 also has a materially
identical pari passu clause.

14. The Loan Agreements also contain (see, e.g., Section 5.02 o f the April 24,1997
Loan Agreement (and similar provisions in the other Loan Agreements)) a negative covenant
that precludes Grenada, until Ex-Im Bank is paid in full, from permitting any obligation “to have
any priority or be subject to any preferential arrangement, whether or not constituting a security
agreement, in favor o f any creditor or class o f creditors, as to security, the repayment o f
principal and interest or the right to receive income or revenue.” (Emphasis added).

15. The Loan Agreements each define “External Indebtedness” as debt denominated
in a currency other than Grenada’s and payable to a nonresident of Grenada.

16According to their plain language, the pari passu clauses preclude Grenada from
making a payment to a holder of External Indebtedness without making a ratable payment at the
same time to Ex-Im Bank.

3

17. In 2005, Grenada made an offer to restructure its commercial debt, which most of
Grenada’s eligible external debtholders accepted.

18. According to its Offering Memorandum, Grenada’s debt restructuring involved an
exchange o f defaulted bonds—processed through J.P. Morgan Chase Bank, N.A. (“JPM”) in
New York, acting as Exchange Agent—for a series o f new bonds denominated in United States
dollars, governed by New York law, and issued pursuant to an indenture with JPM, as indenture
trustee.

19. In Grenada’s Offering Memorandum for that exchange, it stated plainly that
Grenada did not intend to pay any debt that elected not to restructure unless resources became
available to do so. In addition, Grenada stated that it did not intend to pay any amount in respect
of any debt that elected not to restructure if, at the time such payment is due, a payment default
then existed under any new bond issued in the exchange.

20. Ex-Im Bank did not participate in the restructuring.

21. Upon information and belief, Grenada also received debt relief from the Paris
Club in 2006, resulting in the rescheduling of its obligations to bilateral creditors including
Belgium, the United Kingdom, the United States, and France.

22. Upon information and belief, in connection with the 2005 and the Paris Club
restructurings, Grenada has been making substantial interest payments on its external debt for
years, to the tune of over $43,000,000 (approximately $8,242,000 in 2008, $11,429,000 in 2009,
$11,478,000 in 2010, and $12,443,000 in 2011).

4

23As recently as October 15,2012, Grenada paid a full interest payment to the
holders of a $193,000,000 bond arising from the 2005 debt restructuring.

24. At least a portion of these payments are being made through Grenada’s paying
agent, the Bank of New York Mellon (global headquarters at One Wall Street, New York, NY).

25. In a prospectus for the refinancing of Grenada treasury bills in November 2012,
Grenada (1) claimed that it “has witnessed a remarkable recovery” since Hurricanes Ivan and
Emily in 2004 and 2005; (2) highlighted its 2005 commercial debt restructuring, the debt relief it
received from the Paris Club, its years-long participation in IMF economic reform programs, and
its establishment of a Debt Management Unit within its Ministry of Finance; and (3) stated that it
“has an exemplary record” of repaying all issues of treasury bills since Grenada’s entry into that
market.

26. In the earlier action between the parties, Grenada has made many efforts to evade
responsibility for its debts to Ex-Im Bank.

27Ex-Im Bank has been damaged as a result of Grenada’s violations o f the pari
passu clauses and will continue to be damaged by the ongoing violations.

CLAIM FOR SPECIFIC ENFORCEMENT OF THE PARI PASSU CLAUSES AND THE
NEGATIVE COVENANT FOR INJUNCTIVE RELIEF

28. Ex-Im Bank repeats and re-alleges the allegations set forth in paragraphs 1
through 25 herein.

29. Pursuant to the pari passu clauses of the Loan Agreements, Grenada guaranteed
that, “Borrower’s obligations under this Agreement and the Note will at all times rank at least

5

pari passu with Borrower’s any other External Indebtedness (direct or contingent) outstanding
from time to time.”

30. Grenada, therefore, may not make any payment of its External Indebtedness
without also making a ratable payment at the same time to Ex-Im Bank.

31. Pursuant to the negative covenant, described in paragraph 14 above, Grenada
promised not to enter into any “preferential arrangement” with any “class o f creditors” as to “the
repayment of principal and interest.”

32. Grenada, therefore, may not enter into any agreement other creditors under which
it prefers those creditors as to the payment of principal and interest above its obligation to pay
Ex-Im Bank.

33. Grenada’s past payments to holders of its other External Indebtedness, while
paying nothing to Ex-Im Bank, violated the pari passu clauses and its negative covenant not to
prefer other creditors over Ex-Im Bank with respect to the repayment o f principal and interest.

34. Grenada’s continuing payments to holders of its other External Indebtedness,
without making any payments to Ex-Im Bank, will be ongoing violations o f the pari passu
clauses and its negative covenant against granting preferences in payment to other creditors.

35. Ex-Im Bank has suffered irreparable injury from Grenada’s violation of the pari
passu clauses and will continue to suffer such injury unless the Court specifically enforces the
clauses with a mandatory injunction requiring Grenada to pay Ex-Im Bank ratably whenever it
makes payments on its other External Indebtedness.

6

36. Remedies available at law are inadequate to compensate for such injury.

37. Ex-Im Bank has performed its part of the Loan Agreements with Grenada.

38. The balance of equities tips overwhelmingly toward the issuance o f an injunction.

39. The public interest would not be harmed by the issuance of a permanent
injunction.
WHEREFORE, Ex-Im Bank demands judgment against Grenada (1) specifically
enforcing the pari passu clauses and the negative covenant against granting preferential payment
arrangements to other creditors, and (2) awarding Ex-Im Bank its costs, prejudgment interest,
attorneys’ fees and such other and further relief as the Court shall deem just and proper.
Dated: New York, New York SULLIVAN & WORCESTER LLP

March 4,2013
Paul E. Summit
Andrew T. Solomon
1633 Broadway
New York, NY 10019
T. 212.660.3000
F. 212.660.3001
Attorneys for Plaintiff/Judgment Creditor The Export-
Import Bank o f the Republic o f China
7

hier gehts Grenada pari passu mässig an den Kragen....


hier gehts Grenada pari passu mässig an den Kragen....


hier gehts Grenada pari passu mässig an den Kragen....


PLAINTIFF(S) ADDRESS(ES) AND COUNTY(IES)
The Export-Import Bank of the Republic of China
3 Nanhai Road, 8th Floor
Taipei (100) Taiwan
Republic of China

DEFENDANT(S) ADDRESS(ES) AND COUNTY(IES)
Grenada
Ministry of Finance
Financial Complex
Carenage, St. George's, Grenada


Paul E. Summit
Andrew T. Solomon
SULLIVAN & WORCESTER LLP
1633 Broadway
New York, NY 10019
(212)660-3000
Attorneys fo r Plaintiff/Judgment Creditor

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
THE EXPORT-IMPORT BANK OF
THE REPUBLIC OF CHINA,
-X
Plaintiff/Judgment Creditor,
-against-
GRENADA,
Defendant/Judgment Debtor.
-X
i l
Civil Action No:
COMPLAINT
Ca í
•'C
I
Plaintiff The Export-Import Bank of the Republic of China (“Ex-Im Bank”), by its-*7"

attorneys, Sullivan & Worcester LLP, complains of the defendant Grenada as follows^
• ••

JURISDICTION AND VENUE o '

I. This court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C.§ 1330.

2. Venue properly exists in this district pursuant to 28 U.S.C. § 1391(f), based upon
the residence and status o f the parties, the events and omissions giving rise to the claims, and the
agreement which provides the basis for this action.

3. In addition, Grenada irrevocably consented to the non-exclusive jurisdiction of
any State or Federal Court in New York, New York, to waive any objection to that venue on any
ground, and to accept service o f process by registered or certified mail to the notice address
provided in the agreements at issue.

THE PARTIES

4. Ex-Im Bank is a banking institution organized and existing under the laws of the
Republic of China, with its principal place o f business in Taipei, the Republic of China. The
business of Ex-Im Bank includes the lending of money internationally.

5. Grenada is a foreign state as defined in 28 U.S.C. § 1603(a).

BACKGROUND

6. Between 1990 and 2000, Ex-Im Bank and Grenada executed four loan agreements
by which Grenada borrowed a total o f $28,000,000 from Ex-Im Bank (the “Loan Agreements”).

7. On March 16, 2007, in an earlier action between the parties, Civil Action No. 06-
CV-2469(HB)(AJP), this Court entered an amended judgment in favor o f Ex-Im Bank and
against Grenada in the amount o f $21,586,057.38, plus pre-judgment interest, attorney’s fees and
statutory interest in connection with Grenada’s default on four multi-million dollar promissory
notes executed by Grenada in favor o f Ex-Im Bank pursuant to the Loan Agreements.

8. With post-judgment interest, Ex-Im Bank’s judgment against Grenada now stands
in excess of $32,000,000.

9. Almost six years later, Grenada has still not paid anything to Ex-Im Bank in
satisfaction o f the judgment.

10. Section 4.04 o f the Loan Agreement o f April 24, 1997 states, “Borrower’s
obligations under this Agreement and the Note will at all times rank at least pari passu with
Borrower’s any other External Indebtedness (direct or contingent) outstanding from time to
time.”

11. Section 4.04 o f the Loan Agreement o f October 1, 1997 has identical language.

12. Section 5.04 o f the Loan Agreement of July 27, 1990 has a materially identical
pari passu clause.

13. Section 5.01(d) of the Loan Agreement of January 21,2000 also has a materially
identical pari passu clause.

14. The Loan Agreements also contain (see, e.g., Section 5.02 o f the April 24,1997
Loan Agreement (and similar provisions in the other Loan Agreements)) a negative covenant
that precludes Grenada, until Ex-Im Bank is paid in full, from permitting any obligation “to have
any priority or be subject to any preferential arrangement, whether or not constituting a security
agreement, in favor o f any creditor or class o f creditors, as to security, the repayment o f
principal and interest or the right to receive income or revenue.” (Emphasis added).

15. The Loan Agreements each define “External Indebtedness” as debt denominated
in a currency other than Grenada’s and payable to a nonresident of Grenada.

16According to their plain language, the pari passu clauses preclude Grenada from
making a payment to a holder of External Indebtedness without making a ratable payment at the
same time to Ex-Im Bank.

3

17. In 2005, Grenada made an offer to restructure its commercial debt, which most of
Grenada’s eligible external debtholders accepted.

18. According to its Offering Memorandum, Grenada’s debt restructuring involved an
exchange o f defaulted bonds—processed through J.P. Morgan Chase Bank, N.A. (“JPM”) in
New York, acting as Exchange Agent—for a series o f new bonds denominated in United States
dollars, governed by New York law, and issued pursuant to an indenture with JPM, as indenture
trustee.

19. In Grenada’s Offering Memorandum for that exchange, it stated plainly that
Grenada did not intend to pay any debt that elected not to restructure unless resources became
available to do so. In addition, Grenada stated that it did not intend to pay any amount in respect
of any debt that elected not to restructure if, at the time such payment is due, a payment default
then existed under any new bond issued in the exchange.

20. Ex-Im Bank did not participate in the restructuring.

21. Upon information and belief, Grenada also received debt relief from the Paris
Club in 2006, resulting in the rescheduling of its obligations to bilateral creditors including
Belgium, the United Kingdom, the United States, and France.

22. Upon information and belief, in connection with the 2005 and the Paris Club
restructurings, Grenada has been making substantial interest payments on its external debt for
years, to the tune of over $43,000,000 (approximately $8,242,000 in 2008, $11,429,000 in 2009,
$11,478,000 in 2010, and $12,443,000 in 2011).

4

23As recently as October 15,2012, Grenada paid a full interest payment to the
holders of a $193,000,000 bond arising from the 2005 debt restructuring.

24. At least a portion of these payments are being made through Grenada’s paying
agent, the Bank of New York Mellon (global headquarters at One Wall Street, New York, NY).

25. In a prospectus for the refinancing of Grenada treasury bills in November 2012,
Grenada (1) claimed that it “has witnessed a remarkable recovery” since Hurricanes Ivan and
Emily in 2004 and 2005; (2) highlighted its 2005 commercial debt restructuring, the debt relief it
received from the Paris Club, its years-long participation in IMF economic reform programs, and
its establishment of a Debt Management Unit within its Ministry of Finance; and (3) stated that it
“has an exemplary record” of repaying all issues of treasury bills since Grenada’s entry into that
market.

26. In the earlier action between the parties, Grenada has made many efforts to evade
responsibility for its debts to Ex-Im Bank.

27Ex-Im Bank has been damaged as a result of Grenada’s violations o f the pari
passu clauses and will continue to be damaged by the ongoing violations.

CLAIM FOR SPECIFIC ENFORCEMENT OF THE PARI PASSU CLAUSES AND THE
NEGATIVE COVENANT FOR INJUNCTIVE RELIEF

28. Ex-Im Bank repeats and re-alleges the allegations set forth in paragraphs 1
through 25 herein.

29. Pursuant to the pari passu clauses of the Loan Agreements, Grenada guaranteed
that, “Borrower’s obligations under this Agreement and the Note will at all times rank at least

5

pari passu with Borrower’s any other External Indebtedness (direct or contingent) outstanding
from time to time.”

30. Grenada, therefore, may not make any payment of its External Indebtedness
without also making a ratable payment at the same time to Ex-Im Bank.

31. Pursuant to the negative covenant, described in paragraph 14 above, Grenada
promised not to enter into any “preferential arrangement” with any “class o f creditors” as to “the
repayment of principal and interest.”

32. Grenada, therefore, may not enter into any agreement other creditors under which
it prefers those creditors as to the payment of principal and interest above its obligation to pay
Ex-Im Bank.

33. Grenada’s past payments to holders of its other External Indebtedness, while
paying nothing to Ex-Im Bank, violated the pari passu clauses and its negative covenant not to
prefer other creditors over Ex-Im Bank with respect to the repayment o f principal and interest.

34. Grenada’s continuing payments to holders of its other External Indebtedness,
without making any payments to Ex-Im Bank, will be ongoing violations o f the pari passu
clauses and its negative covenant against granting preferences in payment to other creditors.

35. Ex-Im Bank has suffered irreparable injury from Grenada’s violation of the pari
passu clauses and will continue to suffer such injury unless the Court specifically enforces the
clauses with a mandatory injunction requiring Grenada to pay Ex-Im Bank ratably whenever it
makes payments on its other External Indebtedness.

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36. Remedies available at law are inadequate to compensate for such injury.

37. Ex-Im Bank has performed its part of the Loan Agreements with Grenada.

38. The balance of equities tips overwhelmingly toward the issuance o f an injunction.

39. The public interest would not be harmed by the issuance of a permanent
injunction.
WHEREFORE, Ex-Im Bank demands judgment against Grenada (1) specifically
enforcing the pari passu clauses and the negative covenant against granting preferential payment
arrangements to other creditors, and (2) awarding Ex-Im Bank its costs, prejudgment interest,
attorneys’ fees and such other and further relief as the Court shall deem just and proper.
Dated: New York, New York SULLIVAN & WORCESTER LLP

March 4,2013
Paul E. Summit
Andrew T. Solomon
1633 Broadway
New York, NY 10019
T. 212.660.3000
F. 212.660.3001
Attorneys for Plaintiff/Judgment Creditor The Export-
Import Bank o f the Republic o f China
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Mittwoch, 6. März 2013

Pari passu, the cross-sovereign contamination // Some excerpts from a lawsuit filed by the Export-Import Bank of China (Taipei) against Grenada in a United States district court on March 4, 2013…


Pari passu, the cross-sovereign contamination // Some excerpts from a lawsuit filed by the Export-Import Bank of China (Taipei) against Grenada in a United States district court on March 4, 2013…


Pari passu, the cross-sovereign contamination

Some excerpts from a lawsuit filed by the Export-Import Bank of China (Taipei) against Grenada in a United States district court on March 4, 2013…
If you have been following the pari passu saga on ratable payment of sovereign debt — they tell their own story. (Click to enlarge all images.)
1.) Ex-Im Bank already has a judgement on $32m of debt defaulted on by Grenada.
2.) The loan debt had a pari passu clause, and negative pledge language.
3.) Let’s just spell that last bit out, as cited by Ex-Im Bank.
According to their plain language, the pari passu clauses preclude Grenada from making a ratable payment to a holder of External Indebtedness without making a ratable payment at the same time to Ex-Im Bank.
4.) Ex-Im Bank stayed out of Grenada’s 2005 debt restructuring.
5.) It has been watching Grenada pay the people who did restructure.
6.) Bank of New York handled some of that dough. Bank of New York lives in New York.
7.) Ex-Im Bank is now coming after these payments to Grenada’s restructured bondholders. (Hello, intercreditor consequences of ratable payment.)
8.) And Ex-Im Bank’s citing equity.
They didn’t even wait for a final Second Circuit ruling on Argentina making ratable payments to its holdouts. (Why should they, actually? The implications of ratable payment are arguably clear.)
Incidentally observe point 1) there, that Ex-Im Bank is exploring this avenue having already won judgement against Grenada. (The story of their dispute is a long one.)
The $1.3bn of claims involved in NML’s pari passu litigation against Argentina were not judgement debts. Nevertheless. EM Ltd, which holds a prior judgement against Argentina, said (in a pro-holdout amicus brief) that while “the District Court has not yet been asked to address whether the Equal Treatment Provision can be used to enforce an existing judgment,” EM Ltd “believes that the Equal Treatment Provision applies with identical force in the post-judgment context”.
And now we have crossed into new territory.