Nml Capital, Ltd. v. The Republic Of Argentina

727 F.3d 230 (2nd Cir. 2013)

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Nature of the Case

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Facts

D began issuing FAA bonds. The coupon rates were from 9.75% to 15.5% with maturity dates from 2005 until 2031. The agreement protects purchasers from subordination. Of course, D defaulted on the bonds. It stopped making payments of any kind and offered to exchange the bonds for new unsecured and unsubordinated debt at 25-29 cents on the dollar. The new bonds contained dramatically different terms and conditions. D also stated clearly that any old FAA bonds not exchanged would forever and never be paid. P’s did not exchange their bonds and demanded that D make good on them as per their terms. Jurisdiction was in the U.S. as per the original bond terms and conditions. D simply refused to pay certain holders of sovereign bonds issued under a 1994 Fiscal Agency Agreement (FAA). P made a series of promises to the purchasers of the FAA bonds. P promised periodic interest payments, that the bonds would be governed by New York law, that, in the event of default, unpaid interest and principal would become due in full, that any disputes concerning the bonds could be adjudicated in the courts of New York, that each bond would be transferrable and payable to the transferee, regardless of whether it was a university endowment, a so-called 'vulture fund,' or a widow or an orphan. P promised to treat the FAA Bonds at least equally with its other external indebtedness. The court held that by defaulting on the Bonds, enacting legislation specifically forbidding future payment on them, and continuing to pay interest on subsequently issued debt, P breached its promise of equal treatment. In October 2012, the court affirmed injunctions issued by the district court intended to remedy P's breach of the equal treatment obligation in the FAA. On November 21, 2012, the district court issued amended injunctions. Argentina ignored the outstanding bonds and proposed an entirely new set of substitute bonds. At the February 27, 2013, oral argument, counsel for Argentina told the panel that it 'would not voluntarily obey' the district court's injunctions, even if those injunctions were upheld. P's officials have publicly and repeatedly announced their intention to defy any rulings of this Court and the district court with which they disagree. The district court first explained that its 'ratable payment' requirement meant that whenever P pays a percentage of what is due on the Exchange Bonds, it must pay Ps the same percentage of what is then due on the FAA Bonds. The district court explained how its injunctions would prevent third parties from assisting P in evading the injunctions. The district court correctly explained that, through the automatic operation of Federal Rule of Civil Procedure 65(d), they also bind P's 'agents' and 'other persons who are in active concert or participation' with P. P has challenged certain aspects of the amended injunctions, and appeals have also followed from other entities: a group of Exchange Bondholders, styling themselves as the Exchange Bondholder Group (EBG); the Bank of New York Mellon (BNY), indenture trustee to Exchange Bondholders; and Fintech Advisory Inc., a holder of Exchange Bonds. D now claims that the injunction violated the Foreign Sovereign Immunities Act (FSIA).