Blackman said before the judges that the upholding of Griesa’s ruling would be a “nuclear bomb.” // nach La Nacion sieht es für uns recht gut aus in der Sache !!!

La Nacion

A case in the U.S. gets complicated

Wednesday, July 25, 2012

By Martin Kanenguiser

A legal case that Argentine lost in a lower U.S. court got complicated in a hearing held yesterday in New York, over the strong criticism that two judges made toward the decision by the government to not pay all of the bondholders.

Sources connected to the case told LA NACION that the hearing in which the court of appeals had to listen to the position of the Economy Ministry, the litigating vulture funds and the US government turned out to be “tough” for Argentina’s attorneys.

"It was worse than expected and the chances grew that the government will lose,” they admitted.

The judges from the New York court have in their hands this case filed by the vulture funds Dart, Elliott and Aurelius; if they rule in favor of the plaintiffs, it would completely complicate the payment of bonds to creditors that accepted the swaps to exit the default in 2005 and 2010.

"Why would someone who can read lend money once to Argentina?” said one of the judges, Rosemary Pooler, reflecting the exhaustion of various judges for having to deal with the cases coming out of the Argentine default for more than 10 years.

Despite the litigants not accepting either of the two restructurings that Argentina held, they got Judge Thomas Griesa to rule in their favor in the lower court. The basis of that sentence is the wide application of the pari passu clause, which grants them similar rights and obligations as the bondholders that accepted the swaps.

"Your obligation is to treat them equally,” said her colleague, Reena Raggi, to Argentina’s attorney Jonathan Blackman, of the firm of Cleary Gottlieb Steen & Hamilton LLP. The two judges and their colleague Barrington Parker let it be known that Argentina has not treated all of the creditors in a fair manner, while the government says that the vulture funds are only seeking to litigate.

The crux of the controversy is the “locked-shut law” which allowed the government to make the two aforementioned swaps but closed the possibility of moving ahead with subsequent negotiations with the “holdouts”.

A source from one of the investment banks that is negotiating Argentine bonds in the U.S. told LA NACION from New York that, before the end of the year, the court could hand down an “intermediate” decision.

"The greatest probability is that the court is inclined to refute a wide interpretation of the pari passu clause in favor of the creditors, but could find that the ‘locked-shut law’ operates in a discriminatory manner,” the source said.

A government source was more blunt: “If the judges make this swap collapse, all of those that could come forward in Europe will collapse and for that reason the Department of the Treasury, which is against many of the decisions we make, supported us through a brief of amicus curiae.”

On that, Blackman said before the judges that the upholding of Griesa’s ruling would be a “nuclear bomb.”

After the hearing, the ambassador to the United States, Jorge Arguello, said that the holdouts “made a bad deal” by falling out of the swaps, but admitted that their actions in the U.S. courts “complicated and set back the process of finalizing the restructuring agreement.”