A claim by hedge funds for bond payments from Argentina has failed after the funds failed to persuade a New York judge that their claim was exempt from a no-action clause.
Argentina has successfully repelled a lawsuit brought by a group of hedge funds, which alleged that the state had missed a 2013 payment on GDP-linked bonds it issued in 2005 and 2010.
Sitting in the US District Court for the Southern District of New York, Judge Loretta Preska granted the republic summary judgment and threw out the case in a 30 March ruling, describing the case as “a dispute about contractual interpretation”, on the grounds that the claimants had not proved that their claim was exempt from a no-action clause included in the agreement between the state and its investors.
The claimant group was led by funds Aurelius Capital Master, ACP Master, Aurelius Opportunities Fund and 683 Capital Partners, who along with 12 others, filed their claims between January 2019 and December 2020.
Following its financial default in 2001, Argentina had issued bonds with a commitment to make additional payments if its GDP rose by 3%. The investors sued for that payment in 2014. They did not dispute that the no-action clause in the agreement would normally prevent their suit, and accepted that they had not met the preconditions in that clause, but argued that their claim fell within an exemption to the clause, which applied to claims for interest.
However, noting that such clauses should be “strictly construed”, Preska held that the matter did fall within the remit of the clause, and as such was invalid, writing: “This No-Action Clause specifically limits the ability of individual holders (and any beneficial holders) to initiate ‘any suit, action[,] or proceeding in equity or at law’ under the Indenture, GDP-Linked Securities Authorization, or the GDP-Linked Securities.”
“Plaintiffs’ failure to take the contractually required steps precludes them from bringing suit now, and, accordingly, their claims are not properly before the Court,” she continued.
The state had applied for summary judgment in August 2023, while the hedge funds made a counter application in December on procedural grounds, which was rejected by Preska.
The judge recently sat on a separate battle between financiers and Argentina, last year awarding investors in Argentine oil company YPF a sum of USD 16 billion for the expropriation of their shares by the government. That case is under appeal, but an attempt to enforce the judgment is underway in the English Commercial Court.
The other claimants were: Adona, Egoz I, Egoz II, Mastergen, Erythrina, AP 2016 I, AP 2014 3A, AP 2014 2, WASO Holding Corporation, Two Seas Global (Master) Fund and Virtual Emerald International, as well as The Bank of New York Mellon, only as a trustee.
Most of the hedge fund group were represented by partners Daniel Rapport, Michael Palmieri and Edward Friedman of New York firm Friedman Kaplan Seiler Adelman & Robbins, except 683 Capital Partners, which was represented by Matthew Riccardi and Rowan Gaither of Perkins Coie.
Argentina was represented by Bob Giuffra, Sergio Galvis, Amanda Davidoff and Tom White of Sullivan & Cromwell, which is also acting for the state in the YPF dispute.