NEW YORK – A U.S. federal judge has ruled that so-called “me too” bondholders also must be paid before Argentina can make payments on restructured debt.
The ruling by U.S. District Judge Thomas Griesa in Manhattan is a harsh blow to Argentina’s government because it means that it now must pay $8 billion to holdout bondholders – up from an earlier total of $1.7 billion – before it can make payments to investors who agreed to steep haircuts in 2005 and 2010.
After hearing arguments from both parties over two days, Griesa on Friday ruled that the “me too” bondholders deserve the same treatment as a group of U.S. hedge funds led by Elliott Management Corp. founder and CEO Paul Singer’s NML Capital Ltd., which won a similar ruling in Griesa’s court in 2012.
As in the earlier case, Griesa noted in his latest decision that the “me too” litigants’ bonds contain a “pari passu” (equal treatment) clause that requires Argentina to pay them before or at the same time as the exchange bondholders, whose securities are governed by U.S. law.
The Argentine government’s attorney, Carmine Boccuzzi, argued during Wednesday’s hearing that including the “me too” holdouts in the original lawsuit spearheaded by Singer would further complicate efforts to reach a settlement.
But the lawyer representing NML Capital, Robert Cohen, said Argentina had the ability to pay all of its obligations but merely lacked the willingness to do so.
Around 93 percent of Argentina’s creditors agreed to participate in two debt swaps in 2005 and 2010.
But NML and other U.S. hedge funds that bought their Argentine bonds at large discounts following Buenos Aires’ massive 2001 debt default – at the time the largest sovereign default in history – boycotted the restructuring deals.
The origins of that default, a decision adopted amid a financial meltdown and economic depression, go back to Argentina’s 1976-1983 military regime, which presided over a 465 percent expansion in public indebtedness.