Court Overturns Hedge Funds’ Victory Over Argentina

Oct 19 2009 | 12:53pm ET

In a major setback for the hedge funds and other creditors suing Argentina over its default in 2002, a federal appeals court has overturned a lower court decision that could have increased the creditors’ potential returns.

The U.S. Court of Appeals for the Second Circuit ruled that the creditors, led by hedge fund Aurelius Capital Partners, cannot make claims against the country’s pension assets held in the U.S. Argentina nationalized private pension assets last year. The decision overturns a lower-court decision from last year, which led to Argentina’s being held in contempt of court earlier this year. The earlier decision concluded that the nationalization made the pension assets state property, and therefore subject to seizure to settle the creditors’ claims.

But the New York appeals court ruled that the pension funds enjoyed immunity under the Foreign Sovereign Immunities Act.

“We understand the frustration of the plaintiffs who are attempting to recover on judgments they have secured,” the court’s decision read. “Nevertheless, we must respect the act’s strict limitations on attaching and executing upon assets of a foreign state.”

Argentina defaulted on $95 billion in bonds in 2002. The government four years later offered a deal to bondholders that gave them about 30 cents on the dollar, but some 25% of the bondholders refused to accept the restructuring and took their case to court. Other Argentine assets remain frozen.

In the wake of his country’s court victory, Argentina’s economy minister warned the dissenting bondholders that Argentina can’t offer better terms.

“As far as the bondholders are concerned, the first thing they should do is recognize that that is how things are,” Roberto Lavagna told Bloomberg News. “If not, there can’t be any accord. This is an error the bondholders, or those who represent them, are committing.”

In Depth

Related-Company Fees: Normal Industry Practice or Conflicted Compensation?

Nov 11 2015 | 4:23pm ET

Regulatory agencies as well as investors are increasingly exploring whether certain...


Ferrari Roars in Wall Street Debut

Oct 21 2015 | 4:28pm ET

Shares of supercar maker Ferrari jumped as much as 15 percent to a high of nearly...

Guest Contributor

Private Debt - What is the Opportunity?

Nov 11 2015 | 3:28pm ET

In this contributed article, Rob Allard, founding partner of Firebreak Capital...


Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…