Lawyers for Argentina and a group of bondholders managed to stop the clock on a looming debt repayment that might have thrown the country into default in a mere two weeks.
In response to emergency briefs filed this week by Argentina’s lawyers at Cleary Gottlieb Steen & Hamilton and counsel for the bondholders at Boies, Schiller & Flexner, the U.S. Court of Appeals for the Second Circuit agreed Wednesday to stay a Nov. 21 order forcing Argentina to make a $1.3 billion payment to separate group of investors.
The Second Circuit also put Argentina’s appeal of last week’s decision on a fast track, ensuring the increasingly high-profile lawyers involved will be spending the holidays and early next year buried in appellate briefs.
Cleary’s Jonathan Blackman and Carmine Boccuzzi Jr. are leading the fight for Argentina. They’re now loosely aligned with David Boies of Boies Schiller, who represents an investor group that agreed to exchange billions of dollars in Argentine bonds for restructured debt.
The Second Circuit also ruled Wednesday that Boies’ clients can join the appeal.
Battling to uphold the lower court’s decisions is Boies’ old nemesis and sometime co-counsel, Theodore Olson of Gibson, Dunn & Crutcher, who represents holdout sovereign debt investors that refused to restructure their bonds. The court set oral arguments for Feb. 27.
The Second Circuit’s orders, in a standoff that has gained worldwide attention, will quell fears of a new Argentine debt default tied to an upcoming round of bondholder repayments Dec. 15.
The origins of the case stretch all the way back to Argentina’s $80 billion default more than a decade ago. Most bondholders eventually agreed to take about 30 cents on the dollar as part of the country’s debt restructuring, but several funds holding Argentine debt, including NML Capital Ltd and EM Capital Management, refused to exchange their debt and instead brought dozens of lawsuits against Argentina in New York federal court.
The investors, which Argentina decries as vulture funds, have won $10 billion in final judgments, but Argentina has refused to pay up, even as it made regular payments to the restructured bondholders. In February, in a dozen cases that hadn’t produced final judgments, U.S. District Judge Thomas Griesa enjoined Argentina from giving further preferential treatment to holders of restructured debt. He stayed his injunctions, however, until the Second Circuit could weigh in.
The Second Circuit affirmed the injunctions in October. The case went back to Griesa, and on Nov. 21 he lifted the stay and upped the stakes even further. Among other things, he clarified that when Argentina is already scheduled to make a $3.3 billion payment to holders of restructured debt Dec. 15, it must also pay $1.3 billion to the holdout investors.
Argentine president Christina Fernandez has vowed not to pay the funds a cent, meaning Argentina was headed toward another default — albeit a technical one.
Fernandez, the holders of restructured Argentine debt and the international sovereign debt markets have dodged that bullet, at least for the time being.
Sean O’Shea of O’Shea Partners, who represents the exchange bondholders along with Boies Schiller, said in a statement, “The Second Circuit’s order signals its understanding of the serious constitutional and equitable issues at stake. The stay issued late today ensures that the exchange bondholders will receive their rightful payments through December and until the court can carefully consider the significant issues and interests that are involved before rendering its final ruling.”