This past Monday, Argentina’s hold-out bondholders posted a hat trick, prevailing in three cases before the Supreme Court. The high court held that, notwithstanding the Foreign Sovereign Immunities Act, bond holders could subpoena financial institutions for information relating to Argentina’s assets, and separately denied two petitions for certiorari leaving intact a Second Circuit decision that orders Argentina to pay billions of dollars. These decisions have had an immediate impact on sovereign bond markets and should inform the future of sovereign restructurings.
The cases have their origin in Argentina’s 2001 default, which presented creditors with a take-it-or-leave-it proposal: Accept a fraction of the original value of the debt in a restructured bond or get paid nothing at all. Most creditors took Argentina’s offer, but a minority refused. After years of litigation, the Second Circuit affirmed a ruling that Argentina cannot pay creditors who accepted the restructured bonds unless it also pays the hold-out bond-holders full value, and the Supreme Court has now declined to review of the Second Circuit’s ruling.
