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Usuario :    Respuesta a la propuesta del gobierno en NY 30-04-2013 . . .
 
 
 

12-105(L)

12-109 (CON), 12-111 (CON), 12-157 (CON), 12-158 (CON), 12-163 (CON),

12-164 (CON), 12-170 (CON), 12-176 (CON), 12-185 (CON), 12-189 (CON),

12-214 (CON), 12-909 (CON), 12-914 (CON), 12-916 (CON), 12-919 (CON),

12-920 (CON), 12-923 (CON), 12-924 (CON), 12-926 (CON), 12-939 (CON),

12-943 (CON), 12-951 (CON), 12-968 (CON), 12-971 (CON), 12-4694 (CON),

12-4829 (CON), 12-4865 (CON)

 

In the United States Court of Appeals for the Second Circuit

NML CAPITAL, LTD., AURELIUS CAPITAL MASTER, LTD., ACP MASTER, LTD., BLUE

ANGEL CAPITAL I LLC, AURELIUS OPPORTUNITIES FUND II, LLC, PABLO ALBERTO

VARELA, LILA INES BURGUENO, MIRTA SUSANA DIEGUEZ, MARIA EVANGELINA

CARBALLO, LEANDRO DANIEL POMILIO, SUSANA AQUERRETA, MARIA ELENA

CORRAL, TERESA MUNOZ DE CORRAL, NORMA ELSA LAVORATO, CARMEN IRMA

LAVORATO, CESAR RUBEN VAZQUEZ, NORMA HAYDEE GINES, MARTA AZUCENA

VAZQUEZ, OLIFANT FUND, LTD.,

Plaintiffs-Appellees,

-v.-

REPUBLIC OF ARGENTINA,

Defendant-Appellant,

(Caption Continued on Inside Cover)

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

RESPONSE OF APPELLEES TO THE REPUBLIC OF ARGENTINA’S

MARCH 29 PROPOSAL

THE BANK OF NEW YORK MELLON, AS INDENTURE TRUSTEE, EXCHANGE

BONDHOLDER GROUP, FINTECH ADVISORY INC.,

Non-Party Appellants,

EURO BONDHOLDERS, ICE CANYON LLC, EURO BONDHOLDERS,

Intervenors.

Robert A. Cohen

Eric C. Kirsch

DECHERT LLP

1095 Avenue of the Americas

New York, N.Y. 10036

(212) 698-3500

Theodore B. Olson

Matthew D. McGill

Jason J. Mendro

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 955-8500

Counsel for Plaintiff-Appellee NML Capital, Ltd.

Edward A. Friedman

Daniel B. Rapport

FRIEDMAN KAPLAN SEILER &ADELMAN LLP

7 Times Square

New York, N.Y. 10036

(212) 833-1100

Roy T. Englert, Jr.

Mark T. Stancil

ROBBINS, RUSSELL, ENGLERT,ORSECK, UNTEREINER & SAUBER LLP

1801 K Street, N.W.

Washington, D.C. 20006

(202) 775-4500

Counsel for Plaintiffs-Appellees Aurelius Entities and Blue Angel Capital I LLC

Leonard F. Lesser

SIMON LESSER, P.C.

420 Lexington Avenue

New York, N.Y. 10170

(212) 599-5455

Counsel for Plaintiff-Appellee  Olifant Fund, Ltd.

Michael C. Spencer

Gary Snitow

MILBERG LLP

One Pennsylvania Plaza

New York, N.Y. 10019

(212) 594-5300

Counsel for Plaintiffs-Appellees Pablo Alberto Varela et al.

TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT ............................................................................... 1

ARGUMENT ............................................................................................................. 5

I. Argentina’s Proposal Contravenes Both This Court’s October 26

Decision And This Court’s March 1 Order ..................................................... 5

II. Argentina’s Proposal Fails To Demonstrate That The District Court

Abused Its Discretion ...................................................................................... 8

CONCLUSION ........................................................................................................

TABLE OF AUTHORITIES

Page(s)

Cases

Chemical Bank New York Trust Co. v. Kheel,

369 F.2d 845 (2d Cir. 1966) ................................................................................. 10

Elliott Assocs. L.P. v. Banco de la Nacion,

194 F.3d 363 (2d Cir. 1999) ................................................................................. 14

Fin. One Pub. Co. v. Lehman Bros. Special Fin., Inc.,

414 F.3d 325 (2d Cir. 2005) ................................................................................... 9

NML Capital, Ltd. v. Republic of Argentina,

699 F.3d 246 (2d Cir. 2012) ......................................................................... passim

Savoie v. Merchants Bank,

84 F.3d 52 (2d Cir. 1996) ..................................................................................... 14

W.R. Grace & Co. v. Local Union 759, Int’l Union of United Rubber, Cork,

Linoleum & Plastic Workers of Am.,

461 U.S. 757 (1983) ............................................................................................. 12

Weltover, Inc. v. Republic of Argentina,

941 F.2d 145 (2d Cir. 1991) ................................................................................. 14

PRELIMINARY STATEMENT

With its latest submission in this Court, the Republic of Argentina continues

its long and consistent pattern of defaulting on its contractual obligations, defying

the laws of the United States (which its contracts expressly invoked), and showing

contempt for the courts to whose jurisdiction it unreservedly submitted. The government

of Argentina plainly believes the rule of law does not apply to it.

To recapitulate briefly how the parties and this Court have come to this

point: Argentina has defaulted on its indebtedness pursuant to instruments it created

to raise funds under the laws of the United States. Argentina undertook a “unilateral

and coercive approach to [its] debt restructuring,” rejecting practices that

have allowed other “[s]overeign bond restructurings” to be “resolved quickly,

without severe creditor coordination problems, and involving little litigation.” Ex.

A, at 1-2. In keeping with that approach, it refused to comply with its explicit

commitment to treat its “payment obligations” on the bonds held by Appellees “at

least equally with . . . its other . . . unsubordinated External Indebtedness.” 699

F.3d 246, 251 (2d Cir. 2012). The district court, after reviewing numerous briefs

and conducting multiple hearings over the course of 16 months—which provided

Argentina more than ample opportunities to be heard on every conceivable argument

it wished to advance—held that Argentina violated the Equal Treatment Provision

that it had written into its bonds, that an equitable remedy was necessary and

Case: 12-105 Document: 950 Page: 5 04/19/2013 914040 239

2

appropriate, and that a suitable equitable remedy was to require Argentina to make

a ratable payment to Appellees whenever it makes a payment on the Exchange

Bonds. The district court found as fact that Argentina had ample resources to pay

Appellees, as well as the Exchange Bondholders, and that the balance of the equities

overwhelmingly supported the remedy ordered.

This Court unanimously affirmed the district court’s findings and conclusions.

699 F.3d at 257-64. The Court further held that Appellees “were completely

within their rights to reject the 25-cents-on-the-dollar exchange offers” that Argentina

had made in 2005 and 2010. Id. at 263 n.15. Panel rehearing and rehearing

en banc were denied without dissent. This Court explained that the only task

that remained as to the Injunction’s application to Argentina was for the district

court to clarify “how the injunctions’ payment formula is intended to function” (id.

at 250), which the district court did. This Court nevertheless gave Argentina one

final chance to submit in writing “the precise terms of any alternative payment

formula and schedule to which it is prepared to commit.” Dkt. No. 903, at 1

(“March 1 Order”).

In response, Argentina has now submitted a predictably and characteristically

defiant response that fails completely to comply with its equal treatment obligations

or to take seriously the specific directions in this Court’s March 1 Order. Instead

of proposing a formula for “repay[ing] debt obligations on the original

Case: 12-105 Document: 950 Page: 6 04/19/2013 914040 239

3

bonds” (id. at 2), Argentina offers to eliminate those obligations in return for new,

deeply-discounted, potentially unenforceable, and unmarketable paper, payable

decades hence. Indeed, according to Argentina’s own math, those new securities

would be worth less than 15% of what Argentina owes on the FAA Bonds. Argentina

Resp. 9; accord Ex. C, at 1 (Bloomberg estimating the value of Argentina’s

offer at “one-sixth” of what Appellees are owed). Argentina’s response manifests

yet again its contempt for its obligations, the laws of the United States, and

the orders of U.S. courts.

Astoundingly, Argentina has the temerity to claim that its submission reflects

“a good faith effort to comply with the Court’s [October 26] ruling to the extent

possible.” Argentina Resp. 13 n.10 (emphasis added). But Argentina’s statements

to this Court and to the public belie any genuine willingness to comply with

the Court’s orders. At the most recent hearing before this Court, Argentina’s counsel

declared that Argentina would not “voluntarily obey” any order “other than”

the one it “proposed.” Transcript of Feb. 27 Oral Argument 12:23-24, 13:1-2

(“Tr.”), Ex. B. Then, in its March 29 proposal, Argentina portended that “great

harm to the exchange bondholders”—which could be caused only by Argentina’s

own actions—would come if this Court affirms the district court’s Injunction. Argentina

Resp. 11. And just 12 hours after Argentina issued this proposal, its Vice

President declared at a press conference that Argentina is seeking a “mechanism”

Case: 12-105 Document: 950 Page: 7 04/19/2013 914040 239

4

to pay on the Exchange Bonds without paying Appellees, in direct violation of any

ratable payment injunction and the preliminary injunction currently in effect, adding

that “under any condition, in any instance, whatever the [court] result . . . one

way or another, Argentina is going to pay” on the Exchange Bonds. Ex. D; Ex. E,

¶ 2. This is exactly how Argentina has dealt with creditors for the last decade: unilaterally

dictate pennies-on-the-dollar “exchange offers,” and threaten to pay nothing

if the offer is rejected. Argentina has now treated the Court the same way; that

is the very antithesis of “good faith.”

Argentina’s duplicity confirms that the district court was well within its

“considerable latitude” (699 F.3d at 261) to require Argentina—after 11 years of

paying Appellees nothing—to pay what it currently owes Appellees under the

FAA Bonds the next time it pays what it currently owes under the Exchange

Bonds. Argentina’s statements that it will attempt to evade the Injunction if this

Court does not accede to its demands further reinforce that the Injunction is equitable

and—given Argentina’s unyielding disregard for the law to which it voluntarily

submitted—necessary to provide Appellees the relief to which they are entitled.

The district court’s remedy is manifestly within its broad discretion to fashion relief

in equity, is fully consonant with the governing contractual agreements, and

should be affirmed.

Case: 12-105 Document: 950 Page: 8 04/19/2013 914040 239

5

ARGUMENT

I. Argentina’s Proposal Contravenes Both This Court’s October 26

Decision And This Court’s March 1 Order

In its October 26 Decision, this Court held that Appellees were entitled to

specific performance of their rights under the FAA Bonds and explained that Appellees

“were completely within their rights to reject the 25-cents-on-the-dollar exchange

offers.” 699 F.3d at 261-64 & n.15. Then, in its March 1 Order, this Court

asked Argentina to articulate: “(1) how and when it proposes to make current those

debt obligations on the original bonds that have gone unpaid over the last 11 years;

(2) the rate at which it proposes to repay debt obligations on the original bonds going

forward; and (3) what assurances, if any, it can provide that the official government

action necessary to implement its proposal will be taken, and the timetable

for such action.” March 1 Order, at 2. Argentina’s response does none of these

things. More troubling still, Argentina acts as if this Court had neither issued the

October 26 Decision nor denied its petition for rehearing from that ruling.

Argentina’s proposal entails no plan to “make current those debt obligations

on the original bonds that have gone unpaid over the last 11 years” or to repay

them “going forward.” It includes no plan to “repay debt obligations on the original

bonds” at all. Argentina proposes to never pay its obligations on Appellees’

FAA Bonds and, instead, to replace those Bonds with an assortment of new bonds

modeled on—but actually substantially worse than—the exchange offers this Court

Case: 12-105 Document: 950 Page: 9 04/19/2013 914040 239

6

determined Appellees “were completely within their rights to reject.” 699 F.3d at

263 n.15. Even under Argentina’s own math, this package of IOUs is worth just

$210 million—less than 15% of the $1.47 billion Appellees were owed under the

FAA Bonds as of March 1, 2013—and would not begin to repay principal for more

than a decade. Argentina Resp. 9, 12 & n.9.

For instance, the Discount Option—the only option available for 99.9% of

the value of the bonds at issue in this case—ensures that most of the principal on

the FAA Bonds will never be paid; under the Discount Option, the FAA Bonds are

replaced with new securities whose total principal amount is only a fraction—

about one third—of the original principal on the FAA Bonds. And with respect to

past due interest, Argentina’s suggestion that it is “prepared to compensate plaintiffs

for past due interest to bring them current” (Argentina Resp. 5) is simply false.

Argentina does not offer to pay its 11 years of past due interest on the FAA Bonds,

either now or ever. Instead, it proposes to pay—in the form of new bonds—an

amount calculated (i) based on the interest rate of the Discount Bonds, which is

lower than most FAA Bonds, (ii) only on the vastly lower principal amount of the

Discount Bonds, and (iii) only on cash interest that would have been paid on this

substantially reduced principal amount of the Discount Bonds since 2004. Argentina

thus proposes to pay Appellees only a small percentage of the past due interest

it owes, and then only in the form of Argentine IOUs, not in cash. The entire tan-

Case: 12-105 Document: 950 Page: 10 04/19/2013 914040 239

7

gled array of unreliable and likely unmarketable securities that comprise Argentina’s

proposal is further explained in Appendix A hereto.

Not only are the details of Argentina’s proposal unacceptable and unresponsive;

Argentina fails even to provide this Court with meaningful “assurances” that

it will actually comply with its own proposal. March 1 Order, at 2. Argentina’s

vague statement that it is willing to submit unspecified legislation to its Congress is

not paired with any assurances (much less security) that it will not impose a new

moratorium on payments on its new obligations to Appellees. This is, after all, a

country run by the same administration that promised to “not pay a peso” to Appellees.

Ex. F. And the danger of a renewed default would become particularly acute

if Argentina succeeds in implementing its widely reported plan to move offshore

its payments on the Exchange Bonds. See Ex. D (Vice President Boudou: “under

any condition, in any instance, whatever the [court] result . . . one way or another,

Argentina is going to pay” on the Exchange Bonds).1 Argentina appears to believe

1 The Vice President’s declarations are consistent with reports—both preceding

and following the February 27 oral argument—that Argentina is actively

devising a scheme to move the payments on the Exchange Bonds outside of

the United States. Ex. J (“We are hearing that Buenos Aires has advanced

materially in an eventual ‘Plan B. . . .’ [which] will include jurisdiction

change (Buenos Aires and perhaps Italy?), a reopening of the swap for holdout

investors that are not included in the group that is currently litigating

with Argentina, and perhaps even a buyback offer for NY-law debt. . . .”);

Ex. K (reporting that “[t]he government is only now preparing alternative

[Footnote continued on next page]

Case: 12-105 Document: 950 Page: 11 04/19/2013 914040 239

8

this Court should take its word as its bond that it will honor its new, patently unacceptable

proposal. But the long history of this litigation—and now Argentina’s

own words—amply demonstrates the opposite.

II. Argentina’s Proposal Fails To Demonstrate That The District

Court Abused Its Discretion

In its prior decision, this Court explained that the district court “had considerable

latitude” to fashion equitable relief. 699 F.3d at 261. The payment formula

in the district court’s Injunction was well within this broad equitable mandate, and,

unlike Argentina’s proposal, was completely consistent with the language of the

FAA under which Argentina willingly borrowed money, waived sovereign immunity,

and submitted to the jurisdiction of this Court. Appellees’ Post-Remand Brief,

Dkt. No. 821, at 17-48. That Argentina has now proposed a wholly inadequate alternative

remedy, which is directly contrary to this Court’s October 26 Decision

and March 1 Order, cannot possibly make the district court’s considered decision

to award the Injunction an abuse of discretion.

Argentina’s proposal is inequitable most obviously because it would offer

Appellees less than 15% of the $1.47 billion Argentina acknowledges that Appellees

are owed under the terms of the FAA Bonds—less even than what bondhold-

[Footnote continued from previous page]

payment schemes including seeking protection that is 100% legal so that

they can make them abroad, including to Argentine bondholders”).

8

this Court should take its word as its bond that it will honor its new, patently unacceptable

proposal. But the long history of this litigation—and now Argentina’s

own words—amply demonstrates the opposite.

II. Argentina’s Proposal Fails To Demonstrate That The District

Court Abused Its Discretion

In its prior decision, this Court explained that the district court “had considerable

latitude” to fashion equitable relief. 699 F.3d at 261. The payment formula

in the district court’s Injunction was well within this broad equitable mandate, and,

unlike Argentina’s proposal, was completely consistent with the language of the

FAA under which Argentina willingly borrowed money, waived sovereign immunity,

and submitted to the jurisdiction of this Court. Appellees’ Post-Remand Brief,

Dkt. No. 821, at 17-48. That Argentina has now proposed a wholly inadequate alternative

remedy, which is directly contrary to this Court’s October 26 Decision

and March 1 Order, cannot possibly make the district court’s considered decision

to award the Injunction an abuse of discretion.

Argentina’s proposal is inequitable most obviously because it would offer

Appellees less than 15% of the $1.47 billion Argentina acknowledges that Appellees

are owed under the terms of the FAA Bonds—less even than what bondhold-

[Footnote continued from previous page]

payment schemes including seeking protection that is 100% legal so that

they can make them abroad, including to Argentine bondholders”).

Case: 12-105 Document: 950 Page: 12 04/19/2013 914040 239

9

ers received in the 2005 and 2010 exchanges. Argentina thus wishes to ensure that

it never has to make current its obligations on Appellees’ FAA Bonds. Moreover,

these new securities (assuming they are similar to those offered in the 2005 and

2010 exchanges) potentially could include a wide range of clauses and covenants

materially less protective of creditors than those of the FAA Bonds, further impairing

the proposal’s actual value.

Argentina mischaracterizes the plain text of the Equal Treatment Provision

when it claims that it need only accord “equal treatment among bondholders.”

Argentina Resp. 4 (emphasis added). As this Court’s October 26 Decision squarely

held, the Provision does not require Argentina to rank or treat bondholders

equally; it requires Argentina to rank “payment obligations” at least equally. 699

F.3d at 259 (emphasis added). The district court’s Injunction enforced the Provision

by requiring Argentina to pay Appellees what is currently due under the FAA

Bonds whenever, and to the same extent, that Argentina pays what is currently due

on the Exchange Bonds. Argentina’s proposal, in contrast, makes no attempt to

honor its “payment obligations” under the FAA Bonds, now or ever. Under wellestablished

equitable principles, each creditor should receive “what it is entitled

to,” even if “other creditors do not receive the same thing” because they are not

similarly situated. See Fin. One Pub. Co. v. Lehman Bros. Special Fin., Inc., 414

F.3d 325, 344 (2d Cir. 2005). As Judge Friendly observed, “[e]quality among

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10

creditors who have bargained for different treatment is not equity but its opposite.”

Chem. Bank New York Trust Co. v. Kheel, 369 F.2d 845, 848 (2d Cir. 1966)

(Friendly, J., concurring).2

What is more, Argentina apparently would issue the securities for this proposal

in a new series. The securities in this new series would be at obvious risk for

future default given Argentina’s oft-repeated promise never to pay Appellees. This

inevitably will diminish—if not eliminate entirely—the pool of potential secondary

purchasers of these securities, and this diminished demand inevitably will impair

the market value of these new bonds. As Argentina’s former Secretary of Finance

(who was in charge of the 2005 exchange) recently explained to an Argentine news

agency, the “very low liquidity” of the bonds in the proposal “is a way to punish

2 Based on the market value of the bonds Argentina is offering as of March 1,

2013 (even on the generous assumption that this separate series of securities

would be valued in line with those issued in prior exchanges, see infra at 10-

11), Appellees calculate that Argentina’s Discount Option proposal is worth

about 34% less than the value an investor would have received had the investor

participated in the 2005 exchange offer and about 24% less than the

2010 exchange offer—in other words, the sum of all cash payments from the

Exchange Bonds plus their remaining market value. The difference arises in

large part because of the past payments on the GDP Units, to which Appellees

would not be entitled under the proposal. Argentina Resp. 7. The other

major part of the difference is the lesser value of “Global 17s” that would be

issued in lieu of interest, as compared to the cash coupon payments that the

Exchange Bondholders received over the last several years. Argentina’s assertion

that its proposal provides for “equal treatment among bondholders”

(Argentina Resp. 4) thus fails even on its own terms.

Case: 12-105 Document: 950 Page: 14 04/19/2013 914040 239

11

the holdouts because there will be no markets for trading.” Ex. G. Hence, analysts

have summarized Argentina’s proposal: “The plaintiffs are merely given yet another

chance to be paid mainly in highly risky, long-term IOUs the little money

that Argentina wants to pay them.” Ex. H.

Argentina’s belated assertion that it lacks the financial resources to comply

with the district court’s Injunction (Argentina Resp. 12-13) is not only contrary to

the finding of the district court affirmed by this Court (699 F.3d at 263), but is demonstrably

false. Argentina’s recent claim that it could suddenly be exposed to

liabilities of $43 billion is bogus. Argentina Resp. 13. Argentina has decades to

repay its obligations on the Exchange Bonds, and has promised to do so “under any

condition, in any instance, whatever the [court] result.” Ex. D. Argentina paying

Appellees the $1.47 billion that it owes Appellees now would not in any way impair

its ability to honor its payment obligations on the Exchange Bonds over the

coming decades.

Argentina’s suggestion that paying Appellees somehow would trigger an

immediate obligation to pay the entire amount outstanding on the Exchange Bonds

is likewise blatantly false. Argentina misleadingly invokes the Exchange Bondholders’

“Rights Upon Future Offers” clause (Argentina Resp. 7-8 & Annex B),

but that clause comes into play only if Argentina “voluntarily makes an offer to

purchase or exchange” defaulted bonds. Id. Nothing in this clause prevents Ar-

Case: 12-105 Document: 950 Page: 15 04/19/2013 914040 239

12

gentina from complying with an injunction, issued by a district court of the United

States. After all, compliance with an injunction is in no sense “voluntary.” See

W.R. Grace & Co. v. Local Union 759, Int’l Union of United Rubber, Cork, Linoleum

& Plastic Workers of Am., 461 U.S. 757, 766 (1983) (“An injunction issued

by a court acting within its jurisdiction must be obeyed until the injunction is vacated

or withdrawn.”).

Accordingly, the only amount Argentina would pay as a result of this Court

affirming the district court’s Injunction is $1.47 billion, which is a mere fraction of

what Argentina paid to the Exchange Bondholders in December 2012 alone. If

holders of other defaulted indebtedness later bring equal treatment claims of their

own, Argentina will have ample opportunity both to litigate the merits (taking into

account any factors that may distinguish those bonds from the ones at issue here,

including different contractual language and governing law) and to make a showing

of financial need, based on circumstances then prevailing, for the district court

to consider in shaping a remedy.

Similarly meritless is Argentina’s attempt to reassert its argument that the

Injunction will upset sovereign restructurings by other countries. This Court already

rejected that argument in its October 26 Decision (699 F.3d at 263-64), and

again when it denied Argentina’s petition for rehearing. And evidence continues to

mount to support this Court’s conclusion. As Moody’s recently observed,

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13

“[s]overeign bond restructurings have generally been resolved quickly, without severe

creditor coordination problems, and involving little litigation.” Ex. A, at 1.

Moody’s further noted that Argentina is the sole exception—the “only” case

among “the 34 sovereign bond exchanges” that resulted in “persistent litigation”—

that can be explained by the fact that “Argentina was and remains unique in its unilateral

and coercive approach to the debt restructuring.” Id. at 2. Similarly, the Institute

of International Finance (a leading organization that helped negotiate

Greece’s debt restructuring) recently noted that “Argentina finds itself in the present

messy situation because of its own behavior, evidenced by more than a decade

of unilateral treatment of its creditors.” Ex. I, at 5.

Argentina also levels a new, desperate attack on the Injunction, asserting

without any record evidence that the Injunction leads to “exorbitant” returns for

certain Appellees. In the first instance, the amount that Argentina owes today is

the result only of Argentina’s obdurate refusal for 11 years to make payment on its

FAA Bonds. Argentina’s imaginations about the “returns” Appellees will garner

are based only upon conjecture as to the amount that certain Appellees paid for

their bonds on the secondary market, and, in any event, take no account of the extraordinary

lengths to which Appellees have had to go in pursuit of payment. Argentina

Resp. 9-10 & n.6. More importantly, this argument flies in the face of this

Court’s pronouncement that “[a] well-developed market of secondary purchasers

Case: 12-105 Document: 950 Page: 17 04/19/2013 914040 239

14

of defaulted sovereign debt” provides valuable “incentives for primary lenders to

continue to lend to high-risk countries.” Elliott Assocs. L.P. v. Banco de la

Nacion, 194 F.3d 363, 380 (2d Cir. 1999); see also Weltover, Inc. v. Republic of

Argentina, 941 F.2d 145, 153 (2d Cir. 1991) (“If individuals or corporate entities

become wary of their ability to protect their rights in business transactions conducted

in New York they will look elsewhere.”), aff’d, 504 U.S. 607 (1992). If, as

Argentina claims, the purchasers of bonds on the secondary market were entitled to

a lesser form of relief than original holders, the secondary market for such bonds

would rapidly dry up. In turn, that would make it more difficult for countries to

finance their budgets—a result that would harm both creditors and borrowers.3

Finally, Argentina’s proposal is inequitable because it would “require the

continuing supervision of the Court for its enforcement.” Savoie v. Merchs. Bank,

84 F.3d 52, 58 (2d Cir. 1996). Argentina’s proposal would string out its payments

3 In calculating the discount that the Exchange Bondholders supposedly took,

Argentina conveniently ignores that many of those investors also purchased

their bonds at discounts on the secondary market, in some cases in advance

of the Exchange Offers, in other cases after the Injunction was issued, and in

others even after this Court issued its decision of October 26, 2012. Some of

these investors accepted the Exchange Offers gleefully, because they profited

handsomely (yet now present themselves to this Court as “victims”).

This only amplifies the irony that it was the Exchange Bondholders who

demanded that Argentina violate the Equal Treatment Provision by passing

the Lock Law. JA-850.

Case: 12-105 Document: 950 Page: 18 04/19/2013 914040 239

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on the new bonds for more than 20 years, a proposal that seems calculated principally

to allow it an opportunity to implement its plan—now confirmed by its own

Vice President—to find a “mechanism” to move offshore its payments on the Exchange

Bonds, so that it could default on Appellees’ new bonds. In contrast, the

district court’s formula is simple and faithful to the contractual terms of the FAA

Bonds: If Argentina makes its next periodic payment on the Exchange Bonds4—as

it has repeatedly promised to do—it must also pay 100% of what it currently owes

to Appellees. The Court recognized this simplicity at oral argument, noting that

the 100% formula “effectively means that [Appellees] only need[ ] to get one payment

out of this, if [Argentina] pay[s] 100%. Then you’re done.” Tr. 45:8-10.

Under the district court’s Injunction, the Court’s role will end decades sooner than

under Argentina’s proposal.

4 Argentina’s next payment on the Exchange Bonds is due on June 2, 2013,

followed by another payment on June 30.

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CONCLUSION

Argentina’s years of defiance cannot be cured by a convoluted offer to give

Appellees yet more Argentine IOUs, worth pennies-on-the-dollar. Argentina’s disregard

for this Court’s March 1 instructions only serves to demonstrate that it does

not respect its voluntarily assumed obligations or the rule of law. The district

court’s Injunction was in no sense an abuse of discretion, and should be affirmed.

Dated: April 19, 2013 Respectfully submitted,

Robert A. Cohen (robert.cohen@dechert.com)

Eric C. Kirsch (eric.kirsch@dechert.com)

DECHERT LLP

1095 Avenue of the Americas

New York, N.Y. 10036

(212) 698-3500

By: /s/ Theodore B. Olson

Theodore B. Olson (tolson@gibsondunn.com)

Matthew D. McGill (mmcgill@gibsondunn.com)

Jason J. Mendro (jmendro@gibsondunn.com)

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 955-8500

Counsel for Plaintiff-Appellee NML Capital, Ltd

Edward A. Friedman

(efriedman@fklaw.com)

Daniel B. Rapport

(drapport@fklaw.com)

FRIEDMAN KAPLAN SEILER &

ADELMAN LLP

7 Times Square

New York, N.Y. 10036

(212) 833-1100

Roy T. Englert, Jr.

(renglert@robinsrussell.com)

Mark T. Stancil

(mstancil@robinsrussell.com)

ROBBINS, RUSSELL, ENGLERT,

ORSECK, UNTEREINER &

SAUBER LLP

1801 K Street, N.W.

Washington, D.C. 20006

(202) 775-4500

Counsel for Plaintiffs-Appellees Aurelius Entities and Blue Angel Capital I LLC

Leonard F. Lesser

(llesser@simonlesser.com)

SIMON LESSER, P.C.

420 Lexington Avenue

New York, N.Y. 10170

(212) 599-5455

Counsel for Plaintiff-Appellee

Olifant Fund, Ltd.

Michael C. Spencer

(mspencer@milberg.com)

Gary Snitow

(gsnitow@milberg.com)

MILBERG LLP

One Pennsylvania Plaza

New York, N.Y. 10019

(212) 594-5300

Counsel for Plaintiffs-Appellees Pablo

Alberto Varela et al.

Case: 12-105 Document: 950 Page: 21 04/19/2013 914040 239

A-1

APPENDIX A

This Appendix will explain and value Argentina’s proposal, which consists

of an elimination Appellees’ existing FAA Bonds in return foran alternative packages

of new securities. Even under the most favorable assumptions, Argentina’s

proposal offers less than 15% of the amount currently due and payable to Appellees.

In form, the proposal resembles Argentina’s 2010 exchange offer. However,

in substance this proposal is materially worse than either prior exchange offer,

even under the implausible assumption that the bonds Argentina offers will trade at

the same value as existing Exchange Bonds. See supra at 10 n.2.

…..

 
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