Don’t Cry For Me Argentine Bondholders: The Second Circuit Rules

On August 23, the Second Circuit issued its long-awaited opinion on Argentina's appeal from the Southern District's amended injunction requiring that Argentina make "ratable payment" to the plaintiffs when it next makes payment to holders of its Exchange Bonds. Argentina lost comprehensively, in a carefully written and unanimous decision that is highly critical of Argentina's treatment of its creditors, and is quite clearly designed to minimize Argentina's prospects for a successful petition for certiorari to the Supreme Court.

On August 23, the Second Circuit issued its long awaited opinion on Argentina's appeal from the Southern District's amended injunction requiring that Argentina make "ratable payment" to the plaintiffs when it next makes payment to holders of its Exchange Bonds. Argentina lost comprehensively, in a carefully written and unanimous decision that is highly critical of Argentina's treatment of its creditors, and is quite clearly designed to minimize Argentina's prospects for a successful petition for certiorari to the Supreme Court. The Second Circuit's August 23 Opinion While relatively short and highly succinct, the August 23 Opinion appears to decimate every argument - whether based in law or policy - advanced by Argentina and the other parties that filed papers in its support. In summary:

The Second Circuit strives to portray this case as involving the unique conduct of Argentina, not typical of the conduct of other financially-troubled sovereigns, and Argentina's unique pari passu clause. The August 23 Opinion catalogs and then rejects all of the multiple arguments advanced by Argentina and the other entities (primarily Bank of New York Mellon) who supported Argentina's position. However, the Court also stayed the effectiveness of its August 23 Opinion "pending the resolution by the Supreme Court of a timely petition for a writ of certiorari." The Second Circuit's August 23 Opinion, the briefs and other papers relating to this appeal, and our many prior explanations and comments on this case are all available on our Argentine Sovereign Debt webpage: www.shearman.com/argentine-sovereign-debt.

The Second Circuit Suggests This Case, and Argentina's Conduct, Is Unique

In what certainly appears to be an effort to cast this case as unique and fact-bound, reducing the prospect of certiorari, the Court identifies Argentina as a "uniquely recalcitrant debtor," with a "long history of defaulting on its debts," with "persistent defaults" and exhibiting "extraordinary behavior." August 23 Opinion at 5, 23.1

The August 23 Opinion also criticized Argentina's refusal to negotiate, to respond to the Court's own inquiries, and to continually threaten defiance:

Recognizing the unusual nature of this litigation and the importance to Argentina of the issues presented, following oral argument, we invited Argentina to propose to the appellees an alternative payment formula and schedule for the outstanding bonds to which it was prepared to commit. Instead, the proposal submitted by Argentina ignored the outstanding bonds and proposed an entirely new set of substitute bonds. In sum, no productive proposals have been forthcoming. To the contrary, notwithstanding its commitment to resolving disputes involving the FAA in New York courts under New York law, at the February 27, 2013 oral argument, counsel for Argentina told the panel that it âÜwould not voluntarily obey' the district court's injunctions, even if those injunctions were upheld by this Court. Moreover, Argentina's officials have publicly and repeatedly announced their intention to defy any...