Motion for Leave to File an Amicus Curiae Brief

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UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
Thurgood Marshall U.S. Courthouse 40 Foley Square, New York, NY 10007 Telephone: 212-857-8500
MOTION INFORMATION STATEMENT
Docket Number(s):
Motion for:
12-105(L)
Caption [use short title]
NML Capital Ltd. et al. v. The Republic of Argentina
Duane Morris Individual Plaintiffs
Set forth below precise, complete statement of relief sought:
Motion for Leave to File An Amicus Curiae Brief
MOVING PARTY: Duane Morris Individual Plaintiffs
9 Plaintiff
9 Defendant
✔ Appellant/Petitioner
9
9 Appellee/Respondent
MOVING ATTORNEY:
Anthony J. Costantini
OPPOSING PARTY:
OPPOSING ATTORNEY: Carmine D. Boccuzzi Jr.
[name of attorney, with firm, address, phone number and e-mail]
Duane Morris LLP
1540 Broadway
New York, New York 10036
(212) 692-1000; [email protected]
Court-Judge/Agency appealed from:
The Republic of Argentina
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
(212) 225 2000 ; [email protected]
Southern District of New York, Judge Thomas P. Griesa
Please check appropriate boxes:
FOR EMERGENCY MOTIONS, MOTIONS FOR STAYS AND
INJUNCTIONS PENDING APPEAL:
Has request for relief been made below?
9 Yes 9 No
Has this relief been previously sought in this Court?
9 Yes 9 No
Requested return date and explanation of emergency:
Has movant notified opposing counsel (required by Local Rule 27.1):
✔
9
Yes 9 No (explain):
Opposing counsel’s position on motion:
9 Unopposed 9✔ Opposed 9 Don’t Know
Does opposing counsel intend to file a response:
9 Yes 9 No 9✔ Don’t Know
Is oral argument on motion requested?
9 Yes
9✔ No (requests for oral argument will not necessarily be granted)
Has argument date of appeal been set?
9 Yes ✔9 No If yes, enter date:__________________________________________________________
Signature of Moving Attorney:
/s/ Anthony J. Costantini
04/22/2013
___________________________________Date:
___________________
Has service been effected?
9✔ Yes
9 No [Attach proof of service]
ORDER
IT IS HEREBY ORDERED THAT the motion is GRANTED DENIED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
Date: _____________________________________________
By: ________________________________________________
Form T-1080
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IN THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
NML Capital, Ltd. et al,
Plaintiffs-Appellees,
v.
Republic of Argentina,
Defendant-Appellant.
:
:
:
:
:
: CIVIL ACTION NO. 12-105(L)
:
:
:
:
:
MOTION FOR LEAVE TO FILE AN AMICUS CURIAE BRIEF
Pursuant to Federal Rule of Appellate Procedure 29(b), the Duane Morris
Individual Plaintiffs, through their counsel, Duane Morris LLP, respectfully
move for leave to file the attached AMICUS CURIAE BRIEF OF THE DUANE
MORRIS INDIVIDUAL PLAINTIFFS. The Duane Morris Individual Plaintiffs, who
were granted leave to file -- and filed --an amicus brief in support of PlaintiffsAppellees in connection with the Republic of Argentina’s (“Republic”) appeal
of the district court’s orders of November 21, 2012 (the “Appeal”), asked all
parties and intervenors whether they objected to the filing of an amicus brief.
Counsel’s April 17, 2013 letter sent to all counsel is attached to the Declaration
of Suzan Jo as Exhibit A. As of the filing of this Motion, counsel for Plaintiff-
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Appellees, NML Capital, Ltd., and the Aurelius funds; counsel for the Republic;
and counsel for the Exchange Bondholders group object to the filing of the brief.
STANDARD
A potential amicus may file as amicus curiae by leave of court when “the
movant [has an] interest,” the “amicus brief is desirable,” and “the matters
asserted are relevant to the disposition of the case.” Fed. R. App. P. 29(b); see,
e.g., Hui Lin Huang v. Holder, 677 F.3d 130, 133 (2d Cir. 2012). As discussed
further below, all these factors are present here.
1.
THE DUANE MORRIS INDIVIDUAL PLAINTIFFS HAVE
AN INTEREST IN THIS CASE.
The Duane Morris Individual Plaintiffs were granted leave to file an
amicus brief in connection with the Appeal. Thus, this Court has already
recognized that the Duane Morris Individual Plaintiffs have an interest in this
case.
To recapitulate, the Duane Morris Individual Plaintiffs are a group of
various individual judgment creditors who hold bonds issued by the Republic of
Argentina. These bonds are currently in default, and have been since 2001. The
Duane Morris Individual Plaintiffs, who bought pursuant to the same 1994
Fiscal Agency Agreement (“FAA”) at issue here, opted not to participate in the
exchange offers made by Argentina in 2005 and 2010. Therefore, the Duane
2
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Morris Individual Plaintiffs’ rights were also violated by the exchange offers
and the adoption of the Lock Law, and the outcome of this appeal will impact
the Duane Morris Individual Plaintiffs. The Duane Morris Individual Plaintiffs
have previously filed an amicus brief in this Appeal.
2.
THE DUANE MORRIS INDIVIDUAL PLAINTIFFS’ BRIEF
IS DESIRABLE AND RELEVANT TO THE DISPOSITION
OF THE CASE.
This Court had already held that the Republic violated the pari passu
clause of the 1994 FAA when it made payments to the Exchange Bondholders
without a corresponding payments to the holdout bondholders and when it
passed the Lock Law. Id. at 3. The only question is the determination of the
appropriate scope of the remedy available for the Republic’s violation.
Given the Republic’s recalcitrant attitude, one may wonder why the
Republic wastes this Court’s time by submitting a proposal that purportedly
mirrors the offers previously rejected by the holdouts. One may also wonder
why the Republic continues to avail itself of the protections of our courts, all the
while publicly stating that: it has no intention of complying with orders of the
Court with which it disagrees; and as recently as March 31, 2013, reiterating its
3
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disdain for our courts by restating its intention to pay Exchange Bondholders
“no matter what[.]”1
In its post-argument Order of March 1, this Court directed the Republic to
“submit in writing to the court the precise terms of any alternative payment
formula and schedule to which it is prepared to commit.” See NML Capital Ltd.
v. Republic of Argentina, Docket No. 12-105(L), Dkt. # 903, at 1 (2d Cir. Mar.
1, 2013). Specifically, the Court directed the Republic to indicate:
(1) how and when it proposes to make current those
debt obligations on the original bonds that have gone
unpaid over the last 11 years; (2) the rate at which it
proposes to repay debt obligations on the original
bonds going forward; and (3) what assurances, if any,
it can provide that the official government action
necessary to implement its proposal will be taken, and
the timetable for such action. Id. at 2.
In response, the Republic submitted a response that simply mimicked its 2005
and 2010 debt exchanges, which the holdout bondholders have already rejected.
The Duane Morris Individual Plaintiffs seek to file their amicus brief in
order to aid the Court in its evaluation of the Republic’s proposal. In this
regard, the amicus brief analyzes several fatal flaws in the Republic’s proposal
1
See Declaration of Suzan Jo, dated April 22, 2013 (hereinafter “Jo
Decl.”), Ex. B (Katia Porzecanski, New York-for-Buenos Aires Swap
Theory Spreads: Argentina Credit, BLOOMBERG NEWS, Apr. 03, 2013,
available at http://www.bloomberg.com/news/print/2013-04-03/newyork-for-buenos-aires-swap-theory-spreads-argentina-credit.html).
4
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and also sets forth factors for the Court’s consideration in determining an
appropriate remedy for the violation of the pari passu clause.
A.
The Republic’s Proposal On How It Would Make The
Holdout Bondholders Whole on The Past Due Interest Is
Flawed.
In its March 1 Order, the Court’s first question to the Republic was “how
and when it proposes to make current” its past debt obligations. In its proposal,
the Republic simply ignores this part of the Court’s directive: it says that it will
pay nothing on account of interest that accrued during the first two years (20012003) after the Republic’s default. See NML Capital Ltd. v. Republic of
Argentina, Docket No. 12-105(L), Dkt. # 935 (2d Cir. Mar. 29, 2013). As to
the remaining years, the Republic states that it will not “make current those debt
obligations on the original bonds that have gone unpaid over the last 11 years.”
Id. at 1, 3-4 (emphasis added). Instead, the Republic says it will pay interest to
the holdouts at rates specified in the Exchange Bonds, not the original Bonds.
Id.
The Republic’s proposal sets forth two “Options” for the holdout
bondholders: the “Par Option” and the “Discount Option.” Id. at 2-4. To further
dilute the attractiveness of its proposal, the Republic limits the Par Option to
$50,000 per series, despite its recognition that “[T]he Par option is designed for
5
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individual
bondholders . . . .”2 Id. at 3. Moreover, this Par Option offer is limited to
paying interest only for the period during which the current holder actually held
the bonds: this additional limitation allows the Republic to (a) “self-forgive” its
obligation to pay some accrued payment, and (b) ignore the Court’s directive
that the Republic explain how interest would be paid on the original bonds. In
short, the Republic has ignored this Court’s March 1 Order by taking the
position that it will only make a lump-sum payment of a small fraction of
indebtedness accumulated during eleven years of unilaterally-imposed nonpayment.3 This deficiency is reason enough to reject the Republic’s Proposal.
The Republic explains that its proposal, with respect to the past due
payments, matches the amounts paid to the Exchange Bondholders. Id. at 4-5,
2
Individual bondholders who have more than $50,000 in “Eligible
Amount” (a category including many retirees) would be forced to take the
“Discount Option,” further reducing the lump-sum cash payments made
available to the holdouts. As a consequence, the $50,000 limitation would
deprive many retirees of a significant cash payment they badly need.
3
The scope of the Republic’s proposal is limited to the plaintiffs in this
action (who are a sub-set of the holdouts). This Court specifically
directed that the Proposal address all the holdout bonds, and this directive
was ignored as well.
6
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7-8, 11, 13, 15. Since it purports to treat all bondholders equally, the Republic
reasons that the pari passu requirement will be fulfilled.
Given not only the Republic’s violations of the pari passu clause, but also
its dogged long-term defiance of the courts of the United States, there is no
reason why any retroactive remedy should be limited by terms to which the
Exchange Bondholders have agreed. Retroactively, the only sensible resolution
is a lump-sum payment of all interest and principal that has accrued and become
due and payable in eleven years to all the current holders of the holdout bonds
(hereinafter, the “Accrued Payment Component”). Such a payment would be
directed through an order for specific performance, which this Court has
endorsed as the appropriate remedial device. NML Capital Ltd., 699 F.3d at
261-262.4
B.
The Republic’s Proposal On The Treatment Of Its Future
Obligation Is Also Flawed.
Argentina also ignored the Court’s second inquiry, i.e., “the rate at which
[the Republic] proposes to repay debt obligations on the original bonds going
forward.” The Court directed the Republic to specify “the rate at which it
proposes to repay debt obligations on the original bonds going forward.” See
4
The Republic may fear that a voluntary payment exceeding the amount
paid to the Exchange Bondholders would trigger other litigation by the
Exchange Bondholders. An involuntary payment ordered by the courts
would not.
7
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NML Capital Ltd., Dkt. # 903, at 2. This Court’s acceptance of Argentina’s
proposal would do nothing more than cancel the original bonds and force the
Exchange bonds on all the holdouts, who would be effectively subjected to a
judicial cram-down. This portion of the Republic’s proposal ignores the fact
that this Court specifically recognized the right of individual holders to reject the
Republic’s penny-ante exchange offers.5
With respect to the Accrued Payment Component, the Republic should be
ordered that immediately. With respect to the future component, the Proposal is
not responsive to the Court’s request, and should be rejected.
5
Argentina’s flagrant disregard of U.S. courts has not gone unnoticed. The
Institute of International Finance (IIF), which is comprised of the major
banks of the world, has remarked that “Argentina finds itself in this
complicated situation by its own behavior, evidenced by more than a
decade of unilateral treatment of its creditors.” See Jo Decl., Ex. C
(Mariana Shaalo, Argentina vs. Holdouts: Moody’s Minimizes Impact of
Litigation with Vultures and Recalls that the Swap was Unilateral and
Coercive, AMERICAN TASK FORCE ARGENTINA, Apr. 10, 2013, available at
http://www.atfa.org/argentina-vs-holdouts-moodys-minimizes-impact-oflitigation-with-vultures-and-recalls-that-the-swap-was-unilateral-andcoercive/). The IIF also commented that the determination of the remedy
“should be done carefully to not condone the unilateral actions by a
sovereign debtor and weaken the rights of subsequent creditors, especially
the right to demand reparations in court.” See Jo Decl., Ex. D (Veronica
Dalto, Global Bankers Warn About The Risk of Pardoning Argentina,
AMERICAN TASK FORCE ARGENTINA, Apr. 5, 2013, available at
http://www.atfa.org/global-bankers-warn-about-the-risk-of-pardoningargentina/).
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The Republic’s Did Not Even Attempt In Good Faith To
Respond To The Court’s Third Inquiry.
On this Court’s final question, “what assurances, if any, [the Republic]
can provide that the official government action necessary to implement its
proposal will be taken, and the timetable for such action,” (NML Capital Ltd.,
Dkt. # 903, at 2) the Republic devotes a three-sentence paragraph in which it
mouths principles of democratic government (NML Capital Ltd., Dkt. # 935, at
2). The Republic appears to be avoiding a direct answer here as well, and its
virtual disregard of the “timetable” requirement is remarkable. The holdouts,
and this Court, are entitled to a much more considered response after eleven
years of contentious litigation and outright evasion by the Republic.
In short, the Republic has ignored or evaded each one of this Court’s
requirements. There is no real choice but to reject the proposal. The question is
the extent, if any, that the district court’s order should be modified.
CONCLUSION
Based upon the foregoing, the Duane Morris Individual Plaintiffs
respectfully requests that the Court grant it leave to file the AMICUS CURIAE
BRIEF OF THE DUANE MORRIS INDIVIDUAL PLAINTIFFS.
[SIGNATURES ON FOLLOWING PAGE]
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DUANE MORRIS LLP
/s/Anthony J. Costantini
Anthony J. Costantini
[email protected]
Rudolph J. Di Massa, Jr.
[email protected]
Suzan Jo
[email protected]
Mary C. Pennisi
[email protected]
1540 Broadway
New York, NY 10036-4086
Telephone: +1 212 692 1000
Fax: +1 212 692 1020
Counsel for Duane Morris Individual
Plaintiffs
Dated: April 22, 2013
10
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IN THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
:
:
:
:
:
: CIVIL ACTION NO. 12-105(L)
:
:
:
:
:
NML Capital, Ltd. et al,
Plaintiffs-Appellees,
v.
Republic of Argentina,
Defendant-Appellant.
DECLARATION OF SUZAN JO, ESQ.
SUZAN JO, ESQ. declares under penalty of perjury pursuant to 28
U.S.C. § 1746 as follows:
1.
I am associated with the law firm of Duane Morris LLP and a
member of the bar of this Circuit. I am fully conversant with the facts and
circumstances set forth herein. I submit this declaration in support of the
Duane Morris Individual Plaintiffs’ Motion For Leave To File An Amicus
Curiae Brief.
2.
The Duane Morris Individual Plaintiffs, who filed an amicus
brief on the remand, asked all parties and intervenors whether they objected to
1
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the filing of an amicus brief. Attached hereto as Exhibit A is the true and
correct copy of the April 17, 2013 letter sent to all counsel.
3.
The Duane Morris Individual Plaintiffs received objections from
counsel for NML Capital, Ltd., the Aurelius Funds, the Republic of
Argentina, and the Exchange Bondholders.
4.
Attached hereto as Exhibit B is the true and correct copy of
Katia Porzecanski, New York-for-Buenos Aires Swap Theory Spreads:
Argentina Credit, Bloomberg News, Apr. 03, 2013, available at
http://www.bloomberg.com/news/print/2013-04-03/new-york-for-buenosaires-swap-theory-spreads-argentina-credit.html.
5.
Attached hereto as Exhibit C is the true and correct copy of
Mariana Shaalo, Argentina vs. Holdouts: Moody’s Minimizes Impact of
Litigation with Vultures and Recalls that the Swap was Unilateral and
Coercive, American Task Force Argentina, Apr. 10, 2013, available at
http://www.atfa.org/argentina-vs-holdouts-moodys-minimizes-impact-oflitigation-with-vultures-and-recalls-that-the-swap-was-unilateral-andcoercive/.
6.
Attached hereto as Exhibit D is the true and correct copy of
Veronica Dalto, Global Bankers Warn About The Risk of Pardoning
2
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EXHIBIT A
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EXHIBIT B
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New York-for-Buenos Aires Swap Theory Spreads:
Argentina Credit
By Katia Porzecanski - Apr 3, 2013
Argentina’s refusal to improve its offer to holders of defaulted debt suing for full payment in the
U.S. is deepening speculation that the nation will sever ties with the overseas bond market.
The proposal submitted on March 29 mimics the terms of Argentina’s 2005 and 2010 debt
exchanges, a move that could lead to a default on the restructured notes unless the country
removes them from U.S. jurisdiction. While benchmark notes due 2033 sank as much as 2.5 cents
to 51.8 cents on the dollar after Argentina made the offer, they’ve since recouped all their losses as
investors bet that the government will swap them into debt governed by Argentine law.
Vice President Amado Boudou’s pledge on March 31 to pay restructured bondholders “no matter
what” is adding to speculation the government is preparing contingency plans to keep servicing the
debt as it heads toward an impasse with U.S. courts. The 12.71 percentage point gap on yields of
Argentine bonds over U.S. Treasuries, while the widest among major emerging markets, is down
from a four-year high of 13.4 percentage points on Nov. 28.
“Win, lose or draw, if Argentina is pushed, they’ll redo the payment system without a doubt” and
shift investors from debt issued under New York law, Ray Zucaro, who helps oversee $300 million
of emerging-market debt at SW Asset Management, said by phone from Newport Beach,
California. “If push comes to shove and they rule, that’s what they’ll do.”
Argentina’s Prospects
Norma Madeo, a spokeswoman for the Economy Ministry, didn’t reply to an e-mail message
seeking comment on the government’s plans to pay bondholders.
The latest offer to holdout creditors from the nation’s record $95 billion default in 2001 means the
government will probably lose its bid to overturn a lower-court ruling that requires the nation to
repay in full, according to Anna Gelpern, a law professor at American University in Washington.
Jonathan Blackman, a lawyer for Argentina, told the appeals court in February that the nation
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wouldn’t obey the order to make a full payment to the holdouts, which include billionaire Paul
Singer’s hedge fund Elliott Management Corp.
That confrontation sets up a potential default on the restructured notes because the lower court
also blocked the government from servicing those securities without making a $1.3 billion
payment.
‘Whatever Context’
In an interview on local television, Boudou told reporters, “Argentina will meet its commitments in
whatever context. We’re not going to accept a blockage of Argentina’s willingness and ability to
pay.”
Alfredo Scoccimarro, a presidential spokesman, didn’t return telephone calls seeking comment on
Boudou’s statement.
The appeals court asked the holdouts yesterday to file a response to Argentina’s proposed payment
plan by April 22.
Boudou’s comments mean the government is willing to be in contempt of court to make about $1.7
billion in payments this year to investors who accepted losses of about 70 percent in the
restructurings, according to Sebastian Vargas, an economist at Barclays Plc.
If the court rules in favor of the holdouts and prevents intermediaries such as Bank of New York
Mellon Corp. from transferring money to restructured bondholders, Argentina may change the
notes’ jurisdiction to Argentine or even Italian law, according to Alberto Bernal, the head of fixedincome research at Miami-based brokerage Bulltick Capital Markets.
Changing Jurisdiction
Argentina can change the legislation over a single series of the bonds if holders of 75 percent of the
securities consent, according to the securities’ prospectuses. Changing the jurisdiction of two or
more series would require approval by owners of at least 85 percent of all affected bonds and by
holders of at least two-thirds of each individual series.
“We are hearing that Buenos Aires has advanced materially in an eventual ‘Plan B,’” Bernal wrote
in a note to clients April 1. The plan may also include reopening the exchange for holdouts who
aren’t already suing Argentina and a buyback offer for New York-law bonds, according to Bernal.
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Traders shouldn’t underestimate how difficult it would be for President Cristina Fernandez de
Kirchner to prevail under such a plan if the appeals court upholds U.S. District Judge Thomas
Griesa’s ruling, according to Bank of America Corp.
The only way Argentina can continue to pay if the ruling is upheld is “with a totally new, non-U.S.
payment chain, which would take a long time to construct,” Jane Brauer and Flavio de Andrade,
strategists at Bank of America in New York, wrote in a March 27 report.
Third Parties
An exchange into local-law bonds would require bondholders to agree to move their notes to an
Argentine custodian that is a member of Euroclear Bank SA, the world’s biggest settlement system,
to cancel the current bonds, the analysts said in the report. A cancellation would have to be routed
through BNY Mellon, and intermediaries including Euroclear and the Depository Trust Co. would
probably alert the court for clarification, according to the report.
“There may be bondholders that are in support of Argentina’s making a payment, but may not be
as comfortable changing the instruments to Argentine law with all payments made in Argentina
through the Argentine payment system,” Bruce Wolfson, a lawyer at Bingham McCutchen LLP in
New York, who has more than 30 years of experience in emerging-market debt restructurings, said
in a telephone interview. “It’s in my experience unprecedented.”
Debt Indexes
Bonds issued under Buenos Aires law wouldn’t qualify for benchmark international debt indexes,
which would prevent some funds from owning them, according to Bank of America.
Most emerging-market debt sold overseas is governed by New York law, according to the
International Monetary Fund. Before seeking to circumvent the ruling, Argentina can try to appeal
to a larger number of judges or the U.S. Supreme Court.
The cost to protect $10 million of Argentine debt against non-payment during five years with credit
-default swaps fell 108 basis points, or 1.08 percentage points, to 3,271 basis points yesterday, data
compiled by CMA Ltd. show. The swaps pay the buyer face value in exchange for the underlying
securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
Investor Optimism
While firms from JPMorgan to Credit Suisse Group AG said the bonds would sink following
Argentina’s payment proposal, restructured notes have fallen just 0.1 percent since March 29,
according to index data compiled by JPMorgan. That’s a sign investors are optimistic that
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Argentina will do whatever it takes to remain current on the notes, according to Mario Rappoport,
a managing director at Gleacher & Co. in New York.
“All the investors who had their position in Argentina already went through enough hell,”
Rappoport said in a telephone interview. “It just doesn’t feel like the market is ready to collapse.”
To contact the reporter on this story: Katia Porzecanski in New York at
[email protected]
To contact the editors responsible for this story: David Papadopoulos at
[email protected]; Michael Tsang at [email protected]
®2013 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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EXHIBIT C
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Argentina vs. holdouts: Moody’s minimizes impact of litigation
with vultures and recalls that the swap was unilateral and
coercive
El Cronistsa
April 11, 2013
By Mariana Shaalo
The risk ratings agency Moody’s asserted yesterday in a report that the Argentine debt restructuring was
a unique case in the last 15 years for its “unilateral” and “coercive” character.
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In this manner, it minimized the argument from the Argentine government that argues that an
unfavorable sentence in the Court of Appeals in New York which benefits the holdouts would put at risk
future sovereign debt restructurings.
Last week, the Institute of International Finance (IIF) which is made up of the main banks of the world,
had remarked in a report that “Argentina finds itself in this complicated situation by its own behavior,
evidenced by more than a decade of unilateral treatment of its creditors.”
“The sovereign debt restructurings of the last 15 years generally have been resolved in a rapid manner
and almost always without holdout litigation,” Moody’s pointed out in its report to investors. Reviewing
34 debt swaps since 1997, it remarked that only two – from Argentina and from the Dominican Republic
– had a balance of a large percentage of holdouts and remarks that only in the Argentine case was there
“persistent litigation” with the creditors that didn’t accept the restructurings.
“In almost all the swaps a creditors’ committee was created in a reasonable amount of time and there
were relatively rapid negotiations, but the Argentine case was and continues to be unique by its
unilateral and coercive focus,” said Elena Duggar, author of the report.
According to the analysis, on average, sovereign debt restructurings closd 10 months after the
government made known its intention to hold exchanges and seven months aftr the start of negotations
with creditors.
Moody’s asserted that, in the last 34 cases analyzed, the rate of participation by debt holders was 95%,
versus 75% in Argentina and 72% in the Dominican Republic. However, it pointed out that these
percentags rose to 93% in the former and 100% in the latter.
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In mid-March the ratings agency has lowered Argentina’s restructured debt rating a notch (from ‘B3’ to
‘Caa1’) for the litigation in the U.S. courts.
Event the Greylock fund which holds Argentine restructured bonds whose payments could be blocked in
case of an adverse ruling asked that the country’s “unusually intransigent conduct” not be tolerated, in
an article recently published in the Financial Times. “There is no evidence that the recent court decisions
against Argentina, which never made a good will offer, will impede future sovereign restructurings. Quite
the contrary,” it said.
The same point was made days earlier by the vulture fund Aurelius, one of the plaintiffs. “Argentina is
the best example in the world of how a country should not treat its creditors. The global financial system
is at risk by compensating this conduct and by not making it honor its contracts,” wrote its head, Mark
Brodsky.
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American Task Force Argentina
PO Box 3197
Arlington, VA 22203-0197
888-662-2382
[email protected]
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EXHIBIT D
34 of 49
» Global bankers warn about the risk of pardoning Argentina
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Global bankers warn about the risk of pardoning Argentina
El Cronista
April 5, 2013
By Veronica Dalto
Awaiting the respond to payment proposal that Argentina filing in New York court to the vulture funds,
similar to the last swap, the bank banks of the world reacted with concern over the possibility that the
decisions that are taken in the Argentine case end up “condoning the unilateral actions” of the country,
and for the implications that could have for the international sovereign debt market, weakening creditor
rights in the future and the legal certainties that sustain them.
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This is how they see it in the monitoring of the capital markets from the Institute of International Finance
(IIF), the global association of the biggest financial entities of the world, where they are also analyzing
the Cyprus bailout.
The IIF didn’t fail to place the Argentine case in the “correct historical context.” This is that “Argentina
finds itself in this complicated situation by its own behavior, evidenced by more than a decade of
unilateral treatment of its creditors.” “Since the private sector creditors and investors don’t have the
luxury of waiting forever, many (but not all including thousands of small investors) have been obliged to
accept the swap that Argentina offered in 2005 and 2010.”
A portion of the holdouts now have until April 22 to take the Argentine offer or not as payment for their
claim of US$1.3 billion. Then the court could delay a couple of months to issue its sentence, which the
IIF already predicts will be a rejection towards Argentina.
The entity, which coordinated the interests of the big banks in the rescue of Greece, pointed out that the
Argentine case had “fortunately” been a “rare case” among the other 11 recent debt restructurings,
where the sovereign debtor could negotiate with private creditors an agreement that was “mutually
acceptable upon an opportune and orderly basis.”
For IIF, the current debate over improving the framework of sovereign debt restructurings, in legal terms
or clarifying the meaning of pari passu in bond contracts, “should be done carefully to not condone the
unilateral actions by a sovereign debtor and weaken the rights of subsequent creditors, especially the
right to demand reparations in court.”
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“If it does that, it could put on the front burner the essentially inapplicable character of assets before a
sovereign debtor, raising uncertainty, risk and costs in the sovereign debt markets to the detriment of all
the participants in the global financial markets,” he added.
According to the IIF, the negative experience of Argentina and the positive ones for the rest of the
countries “should serve to be an incentive both for the sovereign debtor as well as private creditors to
believe in voluntary negotiation and good faith.”
For now, the Argentine case is pure uncertainty: if the country will appeal a negative sentence or if it
could “dodge” a technical default by changing the jurisdiction of bonds under New York law. Something
the IIF doesn’t think would be easy.
Banqueros globales advierten sobre el riesgo de perdonar a la Argentina
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American Task Force Argentina
PO Box 3197
Arlington, VA 22203-0197
888-662-2382
[email protected]
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12-105(L)
12-109 (CON), 12-111 (CON), 12-157 (CON), 12-158 (CON), 12-163 (CON),
12-164 (CON), 12-170 (CON), 12-176 (CON), 12-185 (CON), 12-189 (CON),
12-214 (CON), 12-909 (CON), 12-914 (CON), 12-916 (CON), 12-919 (CON),
12-920 (CON), 12-923 (CON), 12-924 (CON), 12-926 (CON), 12-939 (CON),
12-943 (CON), 12-951 (CON), 12-968 (CON), 12-971 (CON)
In the
United States Court of Appeals for the Second Circuit
NML CAPITAL, LTD., AURELIUS CAPITAL MASTER, LTD., ACP MASTER, LTD., BLUE
ANGEL CAPITAL I LLC,
(caption continued on inside cover)
Plaintiffs-Appellees,
-v.REPUBLIC OF ARGENTINA,
Defendant-Appellant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
AMICUS CURIAE BRIEF OF DUANE MORRIS INDIVIDUAL PLAINTIFFS
GIANFRANCO AGOSTINI, ALFREDO PELLI AND GRAZIELLA BERCHI,
MILENA AMPALLA (continued on inside cover)
Anthony J. Costantini
Rudolph J. Di Massa, Jr.
Suzan Jo
Mary C. Pennisi
Duane Morris LLP
1540 Broadway
New York, New York 10036
Tel: (212) 692-1000
Counsel for Duane Morris Individual
Plaintiffs
DM3\2517211.1
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AURELIUS OPPORTUNITIES FUND II, LLC, PABLO ALBERTO VARELA, LILA INES
BURGUENO, MIRTA SUSANA DIEGUEZ, MARIA EVANGELINA CARBALLO, LEANDRO
DANIEL POMILIO, SUSANA AQUERRETA, MARIA ELENA CORRAL, TERESA MUNOZ DE
CORRAL, NORMA ELSA LAVORATO, CARMEN IRMA, LAVORATO, CESAR RUBEN
VAZQUEZ, NORMA HAYDEE GINES, MARTA AZUCENA VAZQUEZ, OLIFANT FUND,
LTD.,
Plaintiffs-Appellees,
—v.—
THE REPUBLIC OF ARGENTINA,
Defendant-Appellant,
THE BANK OF NEW YORK MELLON, AS INDENTURE TRUSTEE,
EXCHANGE BONDHOLDER GROUP,
Non-Party Appellants,
EURO BONDHOLDERS,
Non-Party Intervenors
DUANE MORRIS INDIVIDUAL PLAINTIFFS CONTINUED:
ANDREA BONAZZI AND MIRCO MASINA AND LUCA VITALI, ANGELO COTTONI AND
BRUNA MATTIOLI, ANGELO LEONI AND RACHELE BONTEMPI, ANGIOLINO FUSATO
AND GABRIELE FUSATO AND ANNA STORCHI, ANTONELLA BACCHIOCCHI, ALBERTO
BACIUCCO, OTELLO BACIUCCO, FILIPPO BAGOLIN, SARA BARTOLOZZI, ANNELIESE
GUNDA BECKER, GIORGIO BENNATI, STUDIO LEGALE BENNATI, ROBERTO
BERARDOCCO, ORSOLINA BERRA, ADRIANO BETTINELLI, MASSIMO BETTONI,
GRAZIELLA BONADIMAN, STEFANIA BONPENSIERE, EMANUELE BOTTI, BRUNO
CALMASINI AND TARCISIA DALBOSCO, BRUNO PAPPACODA AND LUISELLA
GUARDINCERRI, ITALIA CAMATO, ITALIA CAMATO, VINCENZO CARBONE, CARIFIN
S.A., CARLO AND SUSANNA BRETTI, GIOVANNI CARLOTTA, CARMELINA CENSI,
CESARINO CONSOLINI AND AGOSTINO CONSOLINI, CLAUDIO MANGANO AND
DM3\2517211.1
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MARITZA LENTI, ALBERTO COMPARE, AGOSTINO CONSOLINI, GIANCARLO
BARTOLOMEI CORSI, LAURA COSCI, ALDO DAVID, AUGUSTO ARCANGELI DE FELICIS,
CARLA MARINI ARCANGEL DE FELICIS, ADRIANA DELL'ERA, DIEGO CASTAGNA AND
EUFROSINA DE STEFANO, CARLO FARIOLI, FERNANDA ANGELA LOVERO AND
SABRINA PARODI, ANNA FERRI, FRANCESCO FOGGIATO, FRANCESCO CORSO AND
GIUSEPPINA CORSO, FRANCESCO MAURO GHEZZI AND MARIA LUIGIA CONTI,
FRANCO TRENTIN AND STEFANIA TRENTIN, FRANCESCO MAURO GHEZZI, GIAN
CARLO GANAPINI AND LAURA ANNA CAPURRO, GIAN FRANCESCO CERCATO AND
BARBARA RICCHI, GIORGIO BENNATI AND CARLA MORATA, GIORGIO BISTAGNINO
AND EUGENIA RE, GIOVANNI BOTTI AND MARIA ZILIANI, GIOVANNI GIARDINA
AND VINCENZA SABATELLI, GIUSEPPE SILVIO ROSSINI AND MARINELLA SCALVI,
CELESTINO GOGLIA, GRAZIANO ADAMI AND MONICA CROZZOLETTO, GIANFRANCO
GUARINI, GUGLIELMINA MASSARA AND MARTINO VERNA, RAIMONDO
IALLONARDO, INNOVAMEDICA S.P.A., PAOLO LISI, SERGIO LOVATI, MADDALENA
GAIOLI AND FELICINA GAIOLI, CARMELO MAIO, MANUELA DE ROSA
KUNDERFRANCO AND GIOVANNA CONNENA AND ANTONELLA DE ROSA
KUNDERFRANCO, MARCELLO CALANCA AND ELETTRA CASALINI, MARCO BORGRA
AND DONATELLA FRAGONARA ZANOTTI, MARCO BORGRA AND SERGIO BORGRA,
MARCO CAVALLI AND VALERIA TOSO, ELIDE MARGNELLI, MARIA RITA MORETTO
AND UGO LORENZI, MARIO GIACOMETTI AND VERNA GUALANDI, MARIO VICINI
AND GIUSEPPINA CAPEZZERA, ROMANO MARTON, MATTEO AND GIOVANNI
ZANICHELLI, SALVATORE MELCHIONDA, MIRCO MASINA AND ANDREA BONAZZI,
SIMONETTA MONTANARI, ALESSANDRO MORATA, AMATO MORI, CLAUDIO MORI,
FRANCO PEZZE, FRANCO PEZZE, VALERIO PIACENZA, PERI LUIGI LUCIBELLO PIANI,
ALEESSANDRA REGOLI, SILVIA REGOLI, RENATA BOSCARIOL AND GIAMPAOLO
MONTINO, RINALDO FRISINGHELLI AND GRAZIELLA DACROCE, MARIA ROBBIATI,
PAOLA ROSA, ADRIANO ROSATO, LAURA ROSSINI, INES ROTA, RUGGERO ROSSINI
AND ANTONIETTA GIUSEPPINA BRIOSCHI, RUGGERO ROSSINI AND ANTONIETTA
GIUSEPPINA BRIOSCHI AND RAFFAELE ROSSINI, HILDA RUPPRECHT, SANTE STEFANI
AND ANGELINA SALMISTRARO, MAURIZIO SERGI, SILVANA CORATO AND GIULIA
GREGGIO, SIMONA STACCIOLI, LICIA STAMPFLI-ROSA, STEFANO BISTAGNINO AND
FELICINA GAIOLI, RENATE TIELMAN, TIZIANO SASSELLI AND GIOVANNA FERRO,
MANUELITO TOSO, MAURO TOSO, MARIO VICINI AND VITO ZANCANER
Amicus Curiae
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TABLE OF CONTENTS
PRELIMINARY STATEMENT..................................................................................................... 1 THE REPUBLIC’S “PROPOSAL” FAILS TO ADDRESS THE COURT’S QUESTIONS AND
DOES NOTHING TO MAKE HOLDOUT BONDHOLDER’S WHOLE ........................ 2 THE COURT SHOULD REJECT THE REPUBLIC’S PROPOSAL ............................................ 6 DM3\2517211.1
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TABLE OF AUTHORITIES
Cases
NML Capital Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir. 2012) ........... 1, 4-6
NML Capital Ltd. v. Republic of Argentina, Docket No. 12-105(L),
Dkt. # 903, at 1 (2d Cir. Mar. 1, 2013) ........................................................................... 1
NML Capital Ltd. v. Republic of Argentina, Docket No. 12-105(L),
Dkt. # 935 (2d Cir. Mar. 29, 2013) .................................................................................. 2
ii
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PRELIMINARY STATEMENT
This Court has already held that the Republic violated the pari passu
clause of the 1994 FAA when it made payments to the Exchange Bondholders,
and when it passed the Lock Law (legislation which remains in force). NML
Capital Ltd. v. Republic of Argentina, 699 F.3d 246, 259-260 (2d Cir. 2012).
The only question is the determination of the appropriate scope of the remedy
available for the Republic’s violation.
Given the Republic’s recalcitrant attitude, one may wonder why the
Republic wastes this Court’s time by submitting a proposal that purportedly
mirrors the offers previously rejected by the holdouts. One may also wonder
why the Republic continues to avail itself of the protections of our courts, all the
while publicly stating that: it has no intention of complying with orders of the
Court with which it disagrees; and as recently as March 31, 2013, reiterating its
disdain for our courts by restating its intention to pay Exchange Bondholders
“no matter what[.]”1
In its post-argument Order of March 1, this Court directed the Republic to
“submit in writing to the court the precise terms of any alternative payment
1
See Declaration of Suzan Jo, dated April 22, 2013 (hereinafter “Jo
Decl.”), Ex. B (Katia Porzecanski, New York-for-Buenos Aires Swap
Theory Spreads: Argentina Credit, BLOOMBERG NEWS, Apr. 03, 2013,
available at http://www.bloomberg.com/news/print/2013-04-03/newyork-for-buenos-aires-swap-theory-spreads-argentina-credit.html).
1
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formula and schedule to which it is prepared to commit.” See NML Capital Ltd.
v. Republic of Argentina, Docket No. 12-105(L), Dkt. # 903, at 1 (2d Cir. Mar.
1, 2013). Specifically, the Court directed the Republic to indicate:
(1) how and when it proposes to make current those
debt obligations on the original bonds that have gone
unpaid over the last 11 years; (2) the rate at which it
proposes to repay debt obligations on the original
bonds going forward; and (3) what assurances, if any,
it can provide that the official government action
necessary to implement its proposal will be taken, and
the timetable for such action.
Id. at 2.
THE REPUBLIC’S “PROPOSAL” FAILS TO ADDRESS THE COURT’S
QUESTIONS AND DOES NOTHING TO MAKE HOLDOUT
BONDHOLDER’S WHOLE
The Court was very specific on the first piece of information it wanted:
“how and when [the Republic] proposes to make current those debt obligations
on the original bonds that have gone unpaid over the last 11 years.” Id. at 2.
In its proposal, the Republic simply ignores this part of the Court’s
directive: it says that it will pay nothing on account of interest that accrued
during the first two years (2001-2003) after the Republic’s default. See NML
Capital Ltd. v. Republic of Argentina, Docket No. 12-105(L), Dkt. # 935 (2d
Cir. Mar. 29, 2013). As to the remaining years, the Republic states that it will
not “make current those debt obligations on the original bonds that have gone
unpaid over the last 11 years.” Id. at 1, 3-4 (emphasis added). Instead, the
2
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Republic says it will pay interest to the holdouts at rates specified in the
Exchange Bonds, not the original Bonds. Id.
The Republic’s proposal sets forth two “Options” for the holdout
bondholders: the “Par Option” and the “Discount Option.” Id. at 2-4. To further
dilute the attractiveness of its proposal, the Republic limits the Par Option to
$50,000 per series, despite its recognition that “[T]he Par option is designed for
individual bondholders . . . .”2 Id. at 3. Moreover, this Par Option offer is
limited to paying interest only for the period during which the current holder
actually held the bonds: this additional limitation allows the Republic to (a)
“self-forgive” its obligation to pay some accrued payment, and (b) ignore the
Court’s directive that the Republic explain how interest would be paid on the
original bonds. In short, the Republic has ignored this Court’s March 1 Order
by taking the position that it will only make a lump-sum payment of a small
fraction of indebtedness accumulated during eleven years of unilaterally-
2
Individual bondholders who have more than $50,000 in “Eligible
Amount” (a category including many retirees) would be forced to take the
“Discount Option,” further reducing the lump-sum cash payments made
available to the holdouts. As a consequence, the $50,000 limitation would
deprive many retirees of a significant cash payment they badly need.
3
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imposed non-payment.3 This deficiency is reason enough to reject the
Republic’s Proposal.
The Republic explains that its proposal, with respect to the past due
payments, matches the amounts paid to the Exchange Bondholders. Id. at 4-5,
7-8, 11, 13, 15. Since it purports to treat all bondholders equally, the Republic
reasons that the pari passu requirement will be fulfilled.
Given not only the Republic’s violations of the pari passu clause, but also
its dogged long-term defiance of the courts of the United States, there is no
reason why any retroactive remedy should be limited by terms to which the
Exchange Bondholders have agreed. Retroactively, the only sensible resolution
is a lump-sum payment of all interest and principal that has accrued and become
due and payable in eleven years to all the current holders of the holdout bonds
(hereinafter, the “Accrued Payment Component”). Such a payment would be
directed in the form of an order for specific performance, which this Court has
3
The scope of the Republic’s proposal is limited to the plaintiffs in this
action (who are a sub-set of the holdouts). This Court specifically
directed that the Proposal address all the holdout bonds, and this directive
was ignored as well.
4
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endorsed as the appropriate remedial device. NML Capital Ltd., 699 F.3d at
261-262.4
After ignoring the Court’s first directive, Argentina then proceeds to
ignore the Court’s second directive. The Court directed the Republic to specify
“the rate at which it proposes to repay debt obligations on the original bonds
going forward.” See NML Capital Ltd., Dkt. # 903, at 2. This Court’s
acceptance of Argentina’s proposal would do nothing more than cancel the
original bonds and force the Exchange bonds on all the holdouts, who would be
effectively subjected to a judicial cram-down. This portion of the Republic’s
proposal ignores the fact that this Court specifically recognized the right of
individual holders to reject the Republic’s penny-ante exchange offers.5
4
The Republic may fear that a voluntary payment exceeding the amount
paid to the Exchange Bondholders would trigger other litigation by the
Exchange Bondholders. An involuntary payment ordered by the courts
would not.
5
Argentina’s flagrant disregard of U.S. courts has not gone unnoticed. The
Institute of International Finance (IIF), which is comprised of the major
banks of the world, has remarked that “Argentina finds itself in this
complicated situation by its own behavior, evidenced by more than a
decade of unilateral treatment of its creditors.” See Jo Decl., Ex. C
(Mariana Shaalo, Argentina vs. Holdouts: Moody’s Minimizes Impact of
Litigation with Vultures and Recalls that the Swap was Unilateral and
Coercive, AMERICAN TASK FORCE ARGENTINA, Apr. 10, 2013, available at
http://www.atfa.org/argentina-vs-holdouts-moodys-minimizes-impact-oflitigation-with-vultures-and-recalls-that-the-swap-was-unilateral-andcoercive/). The IIF also commented that the determination of the remedy
5
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With respect to the Accrued Payment Component, the Republic should be
ordered that immediately. With respect to the future component, the Proposal is
not responsive to the Court’s request, and should be rejected.
On this Court’s final question, “what assurances, if any, [the Republic]
can provide that the official government action necessary to implement its
proposal will be taken, and the timetable for such action,” (NML Capital Ltd.,
Dkt. # 903, at 2) the Republic devotes a three-sentence paragraph in which it
mouths principles of democratic government (NML Capital Ltd., Dkt. # 935, at
2). The Republic appears to be avoiding a direct answer here as well, and its
virtual disregard of the “timetable” requirement is remarkable. The holdouts,
and this Court, are entitled to a much more considered response after eleven
years of contentious litigation and outright evasion by the Republic.
THE COURT SHOULD REJECT THE REPUBLIC’S PROPOSAL
In short, the Republic has ignored, avoided, or evaded each one of this
Court’s requirements. There is no real choice but to reject the Proposal. The
question is the extent, if any, that the district court’s order should be modified.
“should be done carefully to not condone the unilateral actions by a
sovereign debtor and weaken the rights of subsequent creditors, especially
the right to demand reparations in court.” See Jo Decl., Ex. D (Veronica
Dalto, Global Bankers Warn About The Risk of Pardoning Argentina,
AMERICAN TASK FORCE ARGENTINA, Apr. 5, 2013, available at
http://www.atfa.org/global-bankers-warn-about-the-risk-of-pardoningargentina/).
6
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Respectfully Submitted,
DUANE MORRIS LLP
By:
s/Anthony J. Costantini
Anthony J. Costantini
E-mail:
[email protected]
Rudolph J. Di Massa, Jr.
Email:
[email protected]
Suzan Jo
E-mail:
[email protected]
Mary C. Pennisi
Email:
[email protected]
1540 Broadway
New York, NY 10036-4086
Telephone: +1 212 692 1000
Fax: +1 212 692 1020
Attorneys for Duane Morris Plaintiffs
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