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

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.