Argentina defeats hedge fund suits over warrants

Argentina offered investors new bonds at a sharp discount in the restructurings. — Bloomberg

BUENOS AIRES: Argentina has won the dismissal of lawsuits by Aurelius Capital Management and other hedge funds seeking payment on securities tied to the performance of the South American nation’s economy.

Aurelius’ 2019 lawsuit claimed it was entitled to payment on gross domestic product-linked warrants issued in connection with restructurings of sovereign debt in 2005 and 2010. Other funds followed with similar claims.

All of the cases were thrown out in a ruling made public on Monday in the Manhattan federal court.

US District Judge Loretta Preska said the suits were barred by a “no-action clause” in the bond agreement that required investors to meet five preconditions before filing suit.

These included getting at least 25% of the bondholders to make a written request to the bond trustee.

“Plaintiffs’ failure to take the contractually required steps precludes them from bringing suit,” the judge said in her ruling. Lawyers for Aurelius declined to comment.

Argentina, which defaulted on US$95bil in sovereign debt in 2001, offered investors new bonds at a sharp discount in the restructurings.

To sweeten the deal, the nation agreed to give investors warrants entitling them to payments when its gross domestic product expanded by more than 3% in a year.

Preska rejected the hedge funds’ argument that their claims fell under an exception for bondholders to sue for principal and interest, saying that didn’t apply to warrants.

Aurelius and the other funds said Argentina should have paid on the warrants in 2014 and now owed principal and interest.

In addition to the suit by Aurelius, Judge Preska dismissed claims by Novoriver SA, ACP Master Ltd, 683 Capital Partners, Adona LLC and Ape Group SpA. — Bloomberg