Argentine debt restructuring

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Argentina began a process of debt restructuring on January 14, 2005, that allowed it to resume payment on the majority of the USD82 billion in sovereign bonds that defaulted in 2002 at the depth of the worst economic crisis in the country's history. A second debt restructuring in 2010 brought the percentage of bonds out of default to 93%, though ongoing disputes with holdouts remained.[1][2] Bondholders who participated in the restructuring have been paid punctually and have seen the value of their bonds rise.[3][4][5]

A 2014 ruling by a District Court Judge Thomas Griesa said that Argentina could not pay its bondholders unless Argentina also paid the holdouts in full. Subsequently, though Argentina had money enough to pay their bondholders the judgment made Argentina unable to do so, and the country was declared in selective default by Standard & Poor's and in restricted default by Fitch.[6][7] The ruling affected New York Law Argentine bonds; Argentine bonds issued under Buenos Aires and European Law were not affected.[8][9]

Background[edit]

The recession that resulted in the crisis lasted between 1999 and 2002; of the USD82 billion in defaulted bonds, 51% were issued during that period.[10] Argentina defaulted on a total of USD93 billion of its external debt on December 26, 2001. Foreign investment fled the country, and capital flow toward Argentina ceased almost completely from 2001 to 2003 (though it later recovered).[11] The currency exchange rate (formerly a fixed 1-to-1 parity between the Argentine peso and the U.S. dollar) was floated, and the peso devalued quickly to nearly 4-to-1, producing a sudden rise in inflation to over 40% and a fall in real GDP of 11% in 2002.[1]

Large-scale debt restructuring was needed urgently, since the high-interest bonds had become unpayable. The Argentine government met severe challenges trying to refinance its debt, however. Creditors (many of them private citizens in Spain, Italy, Germany, Japan, the U.S., and other countries, who had invested their savings and retirement pensions in debt bonds) denounced the default; this included bondholders from Argentina itself, estimated to compose about a fourth of affected bondholders.[12] Refinancing efforts were further undermined by the George W. Bush administration policy of vetoing proposals to create a mechanism for sovereign debt restructuring.[13]

Economic recovery eventually allowed Argentina to offer large-scale debt swaps in 2005 and 2010; the first brought 76% of bonds out of default and the second, 93%.[1] The terms of the debt exchanges were not accepted by all private bondholders, and these became "holdouts." The IMF initially lobbied for the holdouts until Argentina's lump-sum repayment to the IMF in January 2006. Individual creditors worldwide, who represented about one third of this group, mobilized to seek repayment following the default. Among the most prominent were Task Force Argentina, an Italian retail bondholder association; and Mark Botsford, a private U.S. retail bondholder; and Kenneth Dart, who unsuccessfully sued in 2003 to be paid USD724 million for bonds purchased in 2001 for USD120 million.[14] Dart renounced his U.S. citizenship in 1994 for tax avoidance purposes, and his interests in Argentina became the focus of tax evasion charges in 2013.[15] Italian nationals had become the largest group of foreign retail investors in Argentine bonds when during the 1990s, banks in their country purchased USD14 billion in bonds and then resold them to nearly half a million investors; the vast majority rejected the first swap but accepted the second.[16]

Holdout problem[edit]

Holdouts retained a total of USD4 billion in bonds as of 2013.[17] Vulture funds, which owned USD1.3 billion of this total,[5] sued to be repaid at 100% of face value for bonds purchased not from Argentina but on the secondary market for cents on the dollar after the 2002 default,[18] filing injunctions to attach future payments to other bondholders by way of forcing Argentina to settle.[2][19][20][21][22] Vulture funds, moreover, own a large quantity of credit default swaps (CDS) against Argentine bonds, creating a further incentive to not only trigger a default against Argentina; but also to undermine the value of the bonds themselves, as the CDS would pay out at a higher rate if the defaulted bonds decline to extremely low values.[18] Meeting vulture funds' full face-value demands is problematic for Argentina, because although bonds held by vulture funds are a small share of the total (1.6%), such a settlement would lead to lawsuits from other bondholders demanding to be paid on similar terms and thereby create a liability of up to USD120 billion.[23]

A similar strategy had been successfully pursued by vulture funds against Peru and a number of African nations,[22][24] as well as against corporations in the U.S. itself such as Delphi Automotive, which was forced to pay Paul Singer's Elliott Management Corporation a return of over 3,000% on corporate bonds defaulted during the 2008 recession.[25] Singer's Cayman Islands-based vulture fund NML Capital Limited is the principal litigant in this dispute, having paid USD49 million in the secondary market for bonds worth USD832 million by 2014.[26] Its lobbying group, American Task Force Argentina, is the most prominent and best financed opponent of Argentine bond restructuring efforts, spending over $7 million lobbying U.S. Congressmen and becoming the top campaign contributor to a number of these; the most prominent, former Western Hemisphere Subcommittee Chair Connie Mack IV (R-FL), became the main sponsor of a bill in 2012 designed to force Argentina to pay NML nearly $2 billion before losing his Senate bid that year.[20] Their lobbying campaign also extends to Argentina, where NML Capital finances an NGO led by Laura Alonso, a Congresswoman affiliated with the right-wing PRO party.[27]

Argentina has still not been able to raise finance on the international debt markets for fear that any money raised would be impounded by holdout lawsuits; their country risk borrowing cost premiums remain over 10%, much higher than comparable countries. Consequently, Argentina has been paying debt from central bank reserves, has banned most retail purchases of dollars, limited imports, and ordered companies to repatriate money held abroad. Nevertheless, between 2003 and 2012 Argentina met debt service payments totaling USD173.7 billion, of which 81.5 billion was collected by bondholders, 51.2 billion by multilateral lenders such as the IMF and World Bank, and 41 billion by Argentine government agencies. Public external debt denominated in foreign currencies (mainly in dollars and euros) accordingly fell from 150% of GDP in 2002 to 8.3% in 2013.[10]

A Belgian court in June 2013 declined to issue judgment in favor of the creditors to distrain Argentine diplomatic bank accounts.[28] A German court ruled in favor of Argentina in July on the basis of the pari passu (equal treatment) clause.[29] The French government filed an amicus brief in favor of the Argentine position at the U.S. Supreme Court as well,[30] and while the IMF declined to intervene, both it and the World Bank have came out against NML's case, arguing that it could endanger the debt restructuring they oversee around the world.[26] The Government of Argentina lost an U.S. appeals court case in August 2013, and the U.S. Supreme Court declined to hear its appeal the following June.[31] A possible third debt restructuring offer to remaining holdouts on similar terms to the 2010 swap was announced on August 27, 2013.[5]

Disindebtment policy[edit]

First restructuring (2005)[edit]

President Néstor Kirchner and Economy Minister Roberto Lavagna, who presented the first debt restructuring offer in 2005

In January 2005, the Argentine Government offered the first debt restructuring to affected bondholders; nearly 76% of the defaulted bonds (USD62.5 billion) were thus exchanged and brought out of default. The exchange offered longer term par, quasi-par, and discount bonds - the latter with a much lower nominal value (25–35% of the original). The majority of the Argentine bond market thereafter became based on GDP-linked bonds, and investors, both foreign and domestic, netted record yields amid renewed growth.[32] One of the largest single investors in Argentine bonds following these developments was Venezuela, which bought a total of more than USD5 billion in restructured Argentine bonds from 2005 to 2007.[33]

Argentina re-opens debt exchange in 2010[edit]

On April 15, 2010, the debt exchange was re-opened to bondholders who rejected the 2005 swap; 67% of these latter accepted the swap, leaving 7% as holdouts.[1] Holdouts continued to put pressure on the government by attempting to seize Argentine assets abroad,[34] and by suing to attach future Argentine payments on restructured debt to receive better treatment than cooperating creditors.[2][21][35]

A total of approximately USD12.86 billion of eligible debt was tendered into the exchange launched in April 2010; this represented 69.5% of outstanding bonds still held by holdouts.[36] A total of 152 types of bonds in seven different currencies under eight distinct jurisdictions were issued during the two debt exchanges.[37] The 2010 re-opening thus brought the total amount of debt restructured to 92.6% (the original 2005 debt exchange restructured 76.2% of Argentine government debt in default since 2001). The final settlement of the 2010 debt exchange took place on August 11, for bondholders that didn't participate in the early tranche that closed on May 14 and settled on May 17.[1]

Repayment in full to the IMF[edit]

During the restructuring process, the International Monetary Fund was considered a "privileged creditor", that is, all debt was recognized and paid in full. During 2005 Argentina shifted from a policy of constant negotiation and refinancing with the IMF to payment in full, taking advantage of a large and growing fiscal surplus due to rising commodity prices and economic output, with the acknowledged intention of gaining financial independence from the IMF.[38]

President Néstor Kirchner on December 15, 2005, announced his intention of liquidating all the remaining debt to the IMF, in a single payment of USD9.81 billion, initially planned to take place before the end of the year (a similar move had been announced by Brazil two days before, and it is understood that the two measures were to be coordinated).[39]

Argentina under the Kirchner administration had already reduced its debt to the IMF from USD15.5 billion in 2003[22] to USD 10.5 billion at the time of this announcement.[39] The last and largest remaining share of the IMF debt, about USD9.5 billion, was paid on January 3, 2006. The debt was in fact denominated in special drawing rights (SDR; a unit employed by the IMF and calculated over a basket of currencies). The Argentine Central Bank called on the Bank for International Settlements in Basel, Switzerland, where a part of its currency reserves were deposited, to act as its agent. The BIS bought 3.78 billion SDR (equivalent to about USD5.4 billion) from 16 central banks and ordered their transfer to the IMF. The rest (2.874 billion SDR or USD4.1 billion) was transferred from Argentina's account in the IMF, deposited in the U.S. Federal Reserve.[40]

The payment served to cancel the debt installments that were to be paid in 2006 (USD5.1 billion), 2007 (USD4.6 billion), and 2008 (USD432 million). This disbursement represented 8.8% of the total Argentine public debt and decreased the Central Bank's reserves by one third (from USD28 billion to USD18.6 billion). According to the official announcement, it also saved about a billion dollars in interest, though the actual savings amounted to USD842 million (since the reserves that were in the BIS were until then receiving interest payments).[39] One of the largest single investors in Argentine bonds following these Venezuela bought a total of more than USD5 billion in restructured Argentine bonds from 2005 to 2007.[33]

The initial announcement was made in a surprise press conference. President Kirchner said that, with this payment, "we bury an ignominious past of eternal, infinite indebtment." Many of those present later called the decision "historic". The head of the IMF, Rodrigo Rato, saluted it, though remarking that Argentina "faces important challenges ahead". United States Secretary of the Treasury John W. Snow said that this move "shows good faith" on the part of the Argentine government.[39] Nobel Economics Prize laureate Joseph Stiglitz repeatedly criticized the IMF and supported the Argentine strategies on the debt restructuring, but opposed the disindebtment policy, suggesting instead that the IMF should receive the same treatment as the other creditors. Local criticism of the IMF debt paydown centered around the cost, which made funds unavailable for productive purposes within Argentina or to come to terms with outstanding creditors; and second, that the government traded cheap IMF credits for new emissions of public debt at much higher interest rates.[40] Following the initial surprise and mixed reactions local markets rallied, with the MERVAL index growing more in January 2006 than in all of 2005.[41]

The Ministry of Economy reported in June 2005 that the total official Argentine public debt was down by USD63.5 billion from the first semester to USD126.5 billion as a result of the restructuring process; of this, 46% was denominated in dollars, 36% in pesos, and 11% in euros and other currencies. Due to the full payment of the IMF debt and several other adjustments, as of January 2006 the total figure decreased further to USD124.3 billion; bonds not exchanged in 2005 accounted for USD23.4 billion, of which 12.7 billion were already overdue. The Central Bank's reserves surpassed their pre-payment levels on September 27, 2006.[42]

A similar agreement was reached eight years later with the Paris Club of creditor nations (the last remaining Argentine debt still in default besides bonds held by holdouts) on debt repayment totaling USD9 billion including penalties and interest.[43]

Holdouts[edit]

Dispute[edit]

A dispute between Argentina and holdouts has been ongoing since at least the 2005 debt restructuring.[2][35] Holdout portfolios represented of 6% of the debt (USD 4 billion) in 2013;[17] of the USD4 billion in bonds owned by holdouts in 2013, USD1.3bn were held by Cayman Islands-based NML Capital Limited and U.S.-based hedge funds Aurelius Capital Management and Blue Angel.[2][5][17] Bondholders who instead accepted the 2005 swap (three out of four did so) saw the value of their bonds rise 90% by 2012,[3] and these continued to rise strongly during 2013.[5]

Vulture funds that rejected the 2005 and 2010 offers to exchange their defaulted bonds resorted instead to lawsuits to block payments to other bondholders and attempts to seize Argentine government assets abroad – notably Central Bank deposits in the Federal Reserve Bank of New York,[44] the presidential airplane, and the ARA Libertad.[34] The Libertad, an Argentine Navy training frigate, was seized at the behest of NML Capital for ten weeks in late 2012 in the port of Tema, Ghana, until the International Tribunal for the Law of the Sea ruled unanimously that it be released.[45] The dispute limited Argentina's access to foreign credit markets as well; in October 2012 Argentina's theoretical borrowing costs were 10.7%, double the average for developing countries.[17] Although Argentina has not raised money on the money markets since the default, the state-owned oil company YPF has already placed debt in the financial markets to finance its investment program in years to come.[46]

NML Capital[edit]

NML Capital Limited, a Cayman Islands-based offshore unit of Paul Singer's Elliott Management Corporation, purchased the majority of their holdings in 2008, paying an estimated USD49 million for one series of bonds whose face value was over USD220 million;[21] with the subsequent boom in Argentine bond values, this face value grew to USD832 million by 2014.[26] They in turn established the American Task Force Argentina lobbying group against Argentine bond restructuring efforts,[20] and sued to enjoin Argentina's ongoing payments to the bondholders who had participated in the earlier restructurings.[2]

During the 2000s NML Capital's lawyers initially obtained several large judgments against Argentina (all of which were affirmed on appeal). They soon discovered that due to a number of sovereign immunity laws, it was impossible to actually enforce those judgments against the handful of Argentine assets still within the reach of U.S. jurisdiction. They then reexamined their strategy, and decided that if they could not actually seize Argentina's money, they would instead attempt to block Argentina's ongoing payments to the other bondholders who had participated in the 2005 and 2010 restructurings.

The basis of this new strategy arose from a strategic error on Argentina's part which was rooted in its history. Because Argentina was historically so unstable, it would have been difficult for it to solicit investors to buy bonds in Buenos Aires under Argentine jurisdiction, as few external investors trusted Argentina courts to enforce bonds against their own government. This consideration led Argentina to transfer the issue of bonds to New York, under United States law, on April 20, 1976, as were most subsequent bond issues.[47] The bonds were therefore issued under a special kind of bond contract, a "Fiscal Agency Agreement" which was drafted by Argentina's American attorneys under the law of the state of New York. The FAA stipulated that the repayments on the bonds were to be made by Argentina through a trustee, The Bank of New York Mellon, which meant that the U.S. courts did have jurisdiction over that party to issue injunctive relief.[48]

In the Fiscal Agency Agreement, Argentina's attorneys included a boilerplate pari passu clause, but neglected to include a collective action clause. As a result, Argentina could not force NML Capital or the other holdouts to participate in the 2005 or 2010 restructurings, but they could force Argentina to choose between paying all its bondholders in full or none of them, as explained in the next section.

Judicial rulings[edit]

NML Capital sued Argentina in the U.S. District Court for the Southern District of New York (i.e., a federal trial court) by invoking that court's diversity jurisdiction as well as forum selection and choice of law clauses in the Fiscal Agency Agreement itself. Federal district judge Thomas P. Griesa was assigned to hear the case.

The critical term pari passu had not previously been interpreted in any published decision by the courts of the state of New York, but there is no way in U.S. federal civil procedure to directly transfer a case to state court. (By way of contrast, if NML Capital had sued Argentina in a New York state court, Argentina would have had the option to "remove" the case to federal court.) Instead, the district court was required by Erie Railroad Co. v. Tompkins (1938) to make an "Erie guess" as to how a New York state trial court would interpret that clause by applying general principles of contract law in the state of New York as articulated in the published decisions of the New York Court of Appeals and the New York Supreme Court, Appellate Division. The district court ruled in NML Capital's favor and issued broad permanent injunctions against Argentina and the bond trustee. The U.S. Court of Appeals for the Second Circuit (the federal appellate court with jurisdiction over New York) in turn affirmed the district court's interpretation, but did not exercise its optional right to certify that specific issue to the New York Court of Appeals for a ruling on New York state law.

According to the Second Circuit's opinion issued on October 26, 2012 (signed by senior circuit judge Barrington Daniels Parker, Jr.), Paragraph 1(c) of the 1994 version of Argentina's Fiscal Agency Agreement was as follows:

The Securities will constitute ... direct, unconditional, unsecured and unsubordinated obligations of the Republic and shall at all times rank pari passu without any preference among themselves. The payment obligations of the Republic under the Securities shall at all times rank at least equally with all its other present and future unsecured and unsubordinated External Indebtedness....[49]

The Second Circuit interpreted this clause under New York law and concluded "that in pairing the two sentences of its Pari Passu Clause, the FAA manifested an intention to protect bondholders from more than just formal subordination .... the two sentences ... protect against different forms of discrimination: the issuance of other superior debt (first sentence) and the giving of priority to other payment obligations (second sentence)."[49] Thus, the Second Circuit affirmed the trial court's decision that Argentina could either pay all its bondholders or none, but could not pay only those who cooperated with the 2005 and 2010 restructurings and ignore the rest.[49]

Furthermore, the Second Circuit held that the trial court's injunctions did not violate Argentina's sovereign immunity because they merely enforced the prohibition against against both formal and subordination of any part of the debt to any other debt: "They do not attach, arrest, or execute upon any property .... the Injunctions do not require Argentina to pay any bondholder any amount of money; nor do they limit the other uses to which Argentina may put its fiscal reserves. In other words, the Injunctions do not transfer any dominion or control over sovereign property to the court."[49]

As of February 2013, after further decisions by the district court, the case came again before the Second Circuit.[50] The decision of the appeals court was adverse and a motion for rehearing by a full panel was denied on March 26.[51]

Large banks, investors, and the U.S. Treasury Department objected to the federal courts' decisions and expressed concern over losses that could be incurred by bondholders and others, as well over disruption in the bond markets. Vladimir Werning, executive director for Latin American research at JPMorgan Chase, observed that vulture funds "are trying to block the payments system" in the U.S. itself, something "unprecedented in the New York jurisdiction." Kevin Heine, a spokesman for Bank of New York Mellon, which handles Argentina's international bond payments, said the ruling "will create unrest in the credit markets and result in cascades of litigation, which is precisely the opposite effect that an injunction should have."[2] The American Bankers Association agreed, noting that "permitting injunctions that preclude pre-existing obligations whenever expedient to enforce a judgment against the debtor will have significantly adverse consequences for the financial system."[19]

On August 23, 2013, the Second Circuit (in another opinion also signed by Judge Parker) affirmed the lower court's latest ruling clarifying the scope of the permanent injunctions.[52] The court implied at the start of its opinion that since Argentina had taken a calculated risk to enjoy the benefit of New York law (i.e., a lower interest rate), it now had to bear the burden of New York law as well: "In order to enhance the marketability of the bonds, Argentina made a series of promises to the purchasers."[52] Among those promises in the 1994 Fiscal Agency Agreement were the pari passu clause, the aforementioned forum selection and choice-of-law clauses expressly referencing New York, as well as a promise of the free transferability of the bonds to any transferee, regardless of whether that transferee was a "university endowment, a so-called 'vulture fund,' or a widow or an orphan."[52] In other words, as the drafter of the Fiscal Agency Agreement, Argentina could have easily avoided the situation it found itself in by writing a different pari passu clause, omitting the transferability clause, including anti-assignment clauses (e.g., a clause providing that assignees could only recover the amount actually paid rather than face value of the debt), or writing the contract under the law of a different jurisdiction altogether, with the understanding that rational investors would have demanded higher interest rates in exchange for any of these things.

After refuting all of Argentina's arguments on the merits, the Second Circuit concluded: "We do not believe the outcome of this case threatens to steer bond issuers away from the New York marketplace ... We believe that the interest — one widely shared in the financial community — in maintaining New York's status as one of the foremost commercial centers is advanced by requiring debtors, including foreign debtors, to pay their debts."[52]

Notably, when it came to looking at big-picture public policy issues, both Second Circuit opinions examined them only through the lens of federal procedural law (i.e., whether the injunctions were an inequitable remedy) as opposed to the substantive rules of New York state contractual law. Although New York recognizes several defenses to the enforceability of a contract like unconscionability, those defenses are usually available only to the weaker party at the time of contract formation, the party who did not write the contract (i.e., the bondholders), which explains why they were not discussed in the Second Circuit's opinions. If those defenses are unavailable (for example, because the party resisting enforcement was the one who wrote the contract), New York courts will mechanically enforce the plain language of a contract regardless of its harshness because "a court is not free to alter the contract to reflect its personal notions of fairness and equity."[53]

The United States Supreme Court repeatedly denied Argentina's petitions for certiorari, on October 7, 2013 and June 16, 2014, meaning that it was effectively refusing to hear Argentina's appeals from the Second Circuit's decisions.[54][55] The petition denied on June 16 had presented two issues: (1) sovereign immunity and (2) the Second Circuit's decision to simply affirm the trial court's Erie guess as opposed to exercising the option to certify that issue to the New York Court of Appeals.[56]

2014 default[edit]

The US judicial rulings that the holdouts must be paid before bond holders forced Argentina to miss bond payments on July 30, 2014. This in turn caused Argentina to be declared in selective default by Standard & Poor's and in restricted default by Fitch, meaning that some Argentine bondholders were receiving payment while others now weren't.[7] Bonds issued under Argentine Law (paid through Citibank Argentina)[8] and bonds issued under European Law (paid through Euroclear and Clearstream), were not affected.[9]

President Cristina Fernández de Kirchner stated after the latter denial of certiorari that her country had an obligation to pay its creditors, but not to become the victims of extortion by speculators; even if Argentina can't use the U.S. financial system to do so, she said, teams of experts are working on ways to avoid such a default and keep Argentina's promises.[57] The expiration of Rights Upon Future Offers (RUFO) in December 2014 will preclude other bondholders from suing for better terms should the Argentine Government and the vulture funds settle, making such a settlement all the more likely after that date should the dispute continue.[47]

The decision was likewise rejected by among others the United Nations,[58] the Organization of American States,[59] the G-77 (133 nations),[60] and the Council on Foreign Relations,[61] as well as by bondholders whose payments were stopped by the Griesa court.[62][63]

A consortium of Argentine banks, led by Argentine Banking Association (Adeba) President Jorge Brito, meanwhile presented their own settlement offer on July 30, by which all vulture fund bond holdings in dispute would be purchased in installments for a total of USD1.4 billion, but the offer was refused; Citibank, JP Morgan Chase, and HSBC joined efforts to repurchase vulture fund holdings on August 1.[64] The ISDA, of which Singer's Elliott hedge fund is one of 15 bank members, granted Singer and fellow vulture fund plaintiff Aurelius Capital CDS insurance payout of USD1 billion on August 1.[23] Accordingly, Argentina filed a case at the International Court of Justice for judicial malpractice, accusing courts in the U.S. of gross incompetence for allowing two small hedge funds to trigger a needless default against most other bondholders.[65] Information was likewise requested from the Securities and Exchange Commission concerning the possibility of securities fraud involving the bonds by plaintiffs in the case.[66]

Beyond Argentina[edit]

The possibility that holdout creditors can attach future payments on restructured debt and receive better treatment than cooperating creditors distorts incentives, can derail efforts for a cooperative restructuring,[35] and may ultimately lead to the U.S. no longer being viewed as a safe place to issue sovereign debt.[13]

The Second Circuit has acknowledged that New York Judiciary Law Section 489 (descended from an 1813 statute) appears to facially prohibit "essentially all 'secondary' transactions in debt instruments where the purchaser had an intent to enforce the debt obligation through litigation," but then ruled in a 1999 decision involving Elliott Management's earlier case against Peru that the history of that section as interpreted in New York state courts revealed that it was intended only to prohibit purchases made with the sole intent of bringing a lawsuit in and of itself.[67] That is, the New York Legislature was trying to stop attorneys or debt collectors from exploiting cost-shifting clauses in worthless promissory notes to obtain judgments for miniscule amounts (i.e., the face value of the notes) which also awarded massive costs incurred in the course of litigation.[67] Section 489 does not apply to purchases made with the primary intent of collecting on the face value of the instrument, where litigation is merely a means to that end.[67] The United Kingdom, however, permanently banned the use of its courts for suits by vulture funds in 2011.[68] Currently 70% of the world's sovereign bonds are issued in New York, and 22% in London.[69]

This case is likely to be of particular importance in cases in which the creditors are being asked to accept substantial debt and debt service reduction, though it is unclear given the special circumstances of the Elliot/NML case whether it will be broadly applicable to holdouts in other restructurings.[70] The American Bankers Association warned that the district court’s interpretation of the equal terms provision could enable a single creditor to thwart the implementation of an internationally supported restructuring plan, and thereby undermine the decades of effort the United States has expended to encourage a system of cooperative resolution of sovereign debt crises.[21]

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