Declaracion de Clark Apoyando La Mocion de Emergencia

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

NML CAPITAL, LTD.

Plaintiff,
-against-

THE REPUBLIC OF ARGENTINA,

Defendant.

08 Civ. 6978 (TPG)
09 Civ. 1707 (TPG)
09 Civ. 1708 (TPG)

AURELIUS CAPITAL MASTER, LTD. And
ACP MASTER, LTD.,

Plaintiffs,

-against-


Defendant.

09 Civ. 8757 (TPG)
09 Civ. 10620 (TPG)

AURELIUS OPPORTUNITIES FUND II, LLC
and AURELIUS CAPITAL MASTER, LTD.,

Plaintiffs,

-against-


Defendant.

10 Civ. 1602 (TPG)
10 Civ. 3507 (TPG)
10 Civ. 3970 (TPG)
10 Civ. 8339 (TPG)

(captions continue on following
page)

DECLARATION OF CHRISTOPHER J. CLARK

Case 1:08-cv-06978-TPG Document 615 Filed 07/29/14 Page 1 of 103

BLUE ANGEL CAPITAL I LLC,

Plaintiff,

-against-


Defendant.

10 Civ. 4101 (TPG)
10 Civ. 4782 (TPG)

OLIFANT FUND, LTD.,

Plaintiff,

-against-


Defendant.

10 Civ. 9587 (TPG)

PABLO ALBERTO VARELA, et al.,
Plaintiff,

-against-


Defendant.

10 Civ. 5338 (TPG)

I, Christopher J . Clark, am a partner at Latham & Watkins LLP, attorneys for
interested non-parties Euro Bondholders. I am admitted to the Bar of the State of New York and
of this Court. I am submitting this declaration in support of the Euro Bondholders Emergency
Motion for a Stay.
1. Attached as Exhibit A is a true and correct copy of the J uly 22, 2014 hearing
transcript.
2. Attached as Exhibit B is a true and correct copy of the Registered Global
Security Representing Euro-Denominated Par Bonds due 2038.
3. Attached as Exhibit C is a true and correct copy of the J uly 26, 2014 letter
from Christopher Clark to Special Master Pollack and counsel for the Republic of Argentina.
I declare under penalty of perjury that the foregoing is true and correct, pursuant
to 28 U.S.C. 1746.
Dated: J uly 29, 2014
New York, New York

By /s/ Christopher J . Clark
Christopher J . Clark


EXHIBIT A

1
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1 UNI TED STATES DI STRI CT COURT
1 SOUTHERN DI STRI CT OF NEWYORK
2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
2
3 NML CAPI TAL, LTD. , et al . ,
3
4 Pl ai nt i f f s,
4
5 v. 08 CV 6978 ( TPG)
5
6 THE REPUBLI C OF ARGENTI NA, Ar gument
6
7 Def endant .
7
8 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
8
9 New Yor k, N. Y.
9 J ul y 22, 2014
10 10: 30 a. m.
10
11 Bef or e:
11
12 HON. THOMAS P. GRI ESA,
13
13 Di st r i ct J udge
14
14
15
16 APPEARANCES
17
17 DECHERT LLP
18 At t or neys f or Pl ai nt i f f NML Capi t al , Lt d.
18 BY: ROBERT A. COHEN
19
19
20 FRI EDMAN KAPLAN SEI LER & ADELMAN LLP
20 At t or neys f or I nt er est ed Par t i es Aur el i us Capi t al Par t ner s
21 and Bl ue Angel
21 BY: EDWARD A. FRI EDMAN
22 DANI EL B. RAPPORT
22
23
23 GI BSON DUNN & CRUTCHER LLP
24 At t or neys f or Pl ai nt i f f NML Capi t al , Lt d.
24 BY: MATTHEWD. MCGI LL
25
SOUTHERN DI STRI CT REPORTERS, P. C.
( 212) 805- 0300
2
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1 APPEARANCES
2
2 MI LBERG LLP
3 At t or neys f or Var el a pl ai nt i f f s
3 BY: MI CHAEL C. SPENCER
4
4
5 DAVI S POLK & WARDWELL LLP
5 At t or neys f or Ci t i bank
6 BY: KAREN E. WAGNER
6 J AMES L. KERR
7
7
8 LATHAM & WATKI NS LLP
8 At t or neys f or t he Eur o Bondhol der s
9 BY: CHRI STOPHER J . CLARK
9 CRAI G A. BATCHELOR
10
10
11 REED SMI TH LLP
11 At t or neys f or The Bank of New Yor k Mel l on, as I ndent ur e
12 Tr ust ee
12 BY: ERI C A. SCHAFFER
13 NEI L GRAY
13
14
14 LEVI LUBARSKY & FEI GENBAUM LLP
15 At t or neys f or J PMor gan Chase Bank N. A.
15 BY: ANDREA LI KWORNI K WEI SS
16 ALAN H. SCHEI NER
16
17
17 MORGAN LEWI S & BOCKI US LLP
18 At t or neys f or Cl ear st r eamBanki ng
18 BY: J OHN M. VASSOS
19
19
20 GREENFI ELD STEI N & SENI OR LLP
20 At t or neys f or Eur ocl ear Bank
21 BY: PAUL T. SHOEMAKER
21
22
22
23 DANI EL POLLACK
23 Speci al Mast er
24
25
( 212) 805- 0300
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1
2 ( Case cal l ed)
3 THE COURT: We have cer t ai n mot i ons t o be t aken car e
4 of . I ' l l t ake t hemi n any or der . I suppose t he l ogi cal or der
5 woul d be t o deal wi t h t he mot i on r egar di ng t he Ci t i bank
6 si t uat i on i n Ar gent i na. Who want s t o speak about t hat mot i on?
7 MR. FRI EDMAN: Your Honor , Edwar d Fr i edman on behal f
8 of al l of t he pl ai nt i f f s. I wi l l addr ess t hat mot i on. I ' m
9 wi t h t he f i r mof Fr i edman Kapl an Sei l er & Adel man, at t or neys
10 f or t he Aur el i us and Bl ue Angel pl ai nt i f f s. Mr . Cohen on
11 behal f of NML and I and ot her pl ai nt i f f s' counsel have deci ded
12 t hat I wi l l have t he honor of addr essi ng t hi s mot i on on bef or e
13 your Honor on behal f of al l t he pl ai nt i f f s.
14 THE COURT: Go ahead.
15 MR. FRI EDMAN: Shal l I go t o t he l ect er n?
16 THE COURT: That woul d hel p.
17 MR. FRI EDMAN: May i t pl ease t he Cour t , t hi s i s a
18 mot i on f or par t i al r econsi der at i on of your Honor ' s J une 27
19 or der wi t h r espect t o Ci t i bank. Ci t i bank had made a mot i on f or
20 cl ar i f i cat i on of t he i nj unct i on, somet i mes r ef er r ed t o as t he
21 amended Febr uar y 23 or der s.
22 I n gr ant i ng Ci t i bank' s mot i on f or cl ar i f i cat i on, your
23 Honor cl ar i f i ed t hat t he amended Febr uar y 23 or der s do not as a
24 mat t er of l aw pr ohi bi t payment s by Ci t i bank N. A. ' s Ar gent i na
25 br anch on peso- and U. S. dol l ar - denomi nat ed bonds gover ned by
( 212) 805- 0300
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1 Ar gent i ne l aw and payabl e i n Ar gent i na. Thi s mot i on f or
2 r econsi der at i on r el at es onl y t o t he U. S. dol l ar - denomi nat ed
3 bonds. We ar e not chal l engi ng your Honor ' s r ul i ng t hat
4 Ci t i bank can pay t he peso- denomi nat ed bonds.
5 Wi t h r espect t o t he U. S. dol l ar - denomi nat ed bonds,
6 however , we bel i eve t her e ar e numer ous gr ounds f or
7 r econsi der at i on, and we ar e r espect f ul l y r equest i ng t hat your
8 Honor conf i r mt hat t he U. S. dol l ar - denomi nat ed bonds ar e i n
9 f act cover ed by t he amended Febr uar y 23 or der s.
10 THE COURT: How ar e t hey cover ed?
11 MR. FRI EDMAN: The f i r st basi s, your Honor , i s t hat
12 t he U. S. dol l ar - denomi nat ed bonds ar e not si mpl y pai d i n
13 Ar gent i na. What t he r ecor d shows, and t hi s i s a f i l i ng
14 yest er day by Eur ocl ear , what t he r ecor d shows i s t hat t he f unds
15 moved f r omCi t i bank wi t h r espect t o t hese U. S. dol l ar -
16 denomi nat ed bonds t o Eur ocl ear . Eur ocl ear - -
17 THE COURT: They ar e si mpl y cl ear i nghouses. They
18 don' t act as banks. I don' t under st and t hi s mot i on, I ' l l be
19 ver y f r ank wi t h you.
20 MR. FRI EDMAN: I f I may, your Honor , I ' l l t r y t o ver y
21 br i ef l y addr ess a f ew basi c poi nt s. I ' l l come back t o t he
22 payment pr ocess. The f i r st basi c poi nt i s t hat i n cont r ast t o
23 t he peso- denomi nat ed bonds, t he U. S. dol l ar - denomi nat ed bonds
24 ar e ext er nal i ndebt edness wi t hi n t he - -
25 THE COURT: I have r ead t hat br i ef . Coul dn' t we
( 212) 805- 0300
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1 exer ci se a l i t t l e common sense what we have under t he maj or
2 or der i s t he gr eat bul k, mor e t han bul k, we have t he exchange
3 bonds cover ed by t hat or der and we have t he par i passu, but t he
4 bonds ar e t he exchange bonds. I t i s my under st andi ng t hat t he
5 bonds bei ng t al ked about i n your mot i on ar e not par t of t he
6 exchange. AmI r i ght or wr ong?
7 MR. FRI EDMAN: Respect f ul l y, your Honor , t hat woul d
8 not be cor r ect . These U. S. dol l ar - denomi nat ed bonds ar e
9 unquest i onabl y par t of t he bonds t hat wer e i ssued i n t he 2005
10 and 2010 exchanges. I n t hose exchanges t he exchange bonds t hat
11 wer e i ssued and t he exchange bonds t hat wer e ext er nal
12 i ndebt edness wer e i ssued under t he l aws of t he U. S. , t he UK,
13 Ar gent i na, and J apan. Al l of t hose bonds ar e exchange bonds.
14 THE COURT: Wher e ar e t hey payabl e?
15 MR. FRI EDMAN: The payment pr ocess, your Honor , f or
16 al l of t hose - -
17 THE COURT: They go t hr ough t he i ndent ur e t r ust ee,
18 r i ght ?
19 MR. FRI EDMAN: Not f or t he J apanese and t he Ar gent i ne
20 l aw exchange bonds.
21 THE COURT: I ' mgl ad you ment i oned t he J apanese. We
22 wi l l get back t o t he J apanese i n a l i t t l e whi l e. You' r e sayi ng
23 t he except i ons ar e t hose Ar gent i ne bonds and t he J apanese
24 bonds. We' l l get t o t he J apanese l at er . I want t o t al k now
25 about t hose par t i cul ar Ar gent i ne bonds. They ar e not payabl e
( 212) 805- 0300
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1 t hr ough t he i ndent ur e t r ust ee, ar e t hey?
2 MR. FRI EDMAN: Your Honor , i s absol ut el y cor r ect . The
3 Ar gent i ne l aw U. S. dol l ar - denomi nat ed exchange bonds ar e not
4 pai d t hr ough t he i ndent ur e t r ust ee.
5 THE COURT: I n your br i ef you don' t spend much t i me
6 di scussi ng t hat . I n my vi ew i t i s ver y, ver y i mpor t ant , but i t
7 i s not much di scussed i n t he br i ef f i l ed.
8 MR. FRI EDMAN: Your Honor , what I woul d say i s t hat
9 when we l ook at your Honor ' s amended Febr uar y 23 or der , t her e
10 ar e t wo ver y i mpor t ant pr ovi si ons whi ch bear on t hi s quest i on
11 concer ni ng t he f act t hat Bank of New Yor k not t he i ndent ur ed
12 t r ust ee on t he Ar gent i ne l aw bonds.
13 The f i r st pr ovi si on, whi ch I wi l l ment i on j ust br i ef l y
14 because we have t al ked about i t ext ensi vel y, t he f i r st
15 pr ovi si on says t hat i f Ar gent i na makes a payment on t he
16 exchange bonds, Ar gent i na must make a r at abl e payment t o
17 pl ai nt i f f s. That pr ovi si on, as has been di scussed ext ensi vel y,
18 your Honor , appl i es t o al l t he exchange bonds whet her or not
19 Bank of New Yor k i s t he i ndent ur e t r ust ee.
20 The second, and t hi s i s somet hi ng we have not
21 di scussed r ecent l y, t her e i s a separ at e par agr aph i n your
22 Honor ' s Febr uar y 23 or der t hat speci f i cal l y enj oi ns t he
23 r epubl i c f r omvi ol at i ng t he par i passu pr ovi si on i n t he f i scal
24 agency agr eement . I t i s a separ at e pr ovi si on f r omt he
25 par agr aph t hat r equi r es t he r at abl e payment .
( 212) 805- 0300
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1 The poi nt of t hat par agr aph enj oi ni ng a vi ol at i on of
2 t he par i passu pr ovi si on i s t hat when we l ook at t hi s uni ver se
3 of exchange bonds, whet her or not t he Bank of New Yor k i s t he
4 i ndent ur e t r ust ee, al l of t hese exchange bonds, because t hey
5 ar e payabl e i n a cur r ency ot her t han Ar gent i ne pesos, t hey al l
6 ar e ext er nal i ndebt edness wi t hi n t he meani ng of t he par i passu
7 pr ovi si on.
8 What we ar e f aci ng her e, your Honor - -
9 THE COURT: Can I i nt er r upt you?
10 MR. FRI EDMAN: Of cour se.
11 THE COURT: I don' t under st and t he pr act i cal poi nt
12 t hat woul d emer ge f r omyour ar gument . I t seems t o me t hat you
13 have somet hi ng di f f er ent . You have bonds i ssued i n Ar gent i na,
14 payabl e i n Ar gent i na, cl i ent s I assume of Ci t i bank i n
15 Ar gent i na. Fr oma pr act i cal , common sense st andpoi nt , why do
16 t hey have t o get dr agged i nt o t hi s i nt er nat i onal compl ex?
17 Can' t we j ust possi bl y use some common sense and r ecogni ze t hat
18 t hey have di f f er ences?
19 You may be t echni cal l y r i ght . Your br i ef was
20 t echni cal l y r i ght . Al l of t hat i s f i ne. But cannot we
21 r ecogni ze t hat t her e ar e some peopl e down i n Ar gent i na who ar e
22 r eal l y i n a di f f er ent si t uat i on, and can' t we al l ow t hemt o get
23 pai d i nst ead of dr aggi ng t hemi nt o t hi s over al l di f f i cul t y,
24 whi ch i s cer t ai nl y di f f i cul t ? I ' mj ust sayi ng t hat I woul d
25 l i ke t o see some common sense appl i ed her e and not a l ot of
( 212) 805- 0300
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1 undoubt edl y f i ne l egal r easoni ng, and so f or t h.
2 MR. FRI EDMAN: Your Honor , I t hi nk t her e i s an
3 i mpor t ant poi nt of cl ar i f i cat i on I need t o make. I hear d your
4 Honor say we shoul d be pr act i cal about bondhol der s, cust omer s
5 of Ci t i bank i n Ar gent i na who want t o be pai d. The i mpor t ant
6 poi nt of cl ar i f i cat i on i s t hat when Ci t i bank r ecei ves t he money
7 and passes i t on so t hat exchange bondhol der s can be pai d, we
8 ar e not si mpl y t al ki ng about t he bondhol der s i n Ar gent i na.
9 THE COURT: We ar e t al ki ng about a coupl e of
10 cl ear i nghouses i n Eur ope, t hat ' s what we ar e doi ng, and t hat ' s
11 about al l .
12 MR. FRI EDMAN: Wi t h al l r espect , your Honor , i f I may
13 say, Eur ocl ear , as your Honor poi nt s out , i s one of t he
14 Eur opean cl ear i nghouses. Wi t h r espect t o t hese Ar gent i ne l aw
15 U. S. dol l ar - denomi nat ed bonds, Ci t i has t r ansf er r ed f unds t o
16 Eur ocl ear bank. Those f unds ar e now i n t he account of
17 Eur ocl ear bank i n New Yor k. Eur ocl ear wi l l t hen send t he f unds
18 t o Eur ocl ear par t i ci pant s whose cust omer s hol d Ar gent i ne l aw - -
19 THE COURT: But t hey ar e st i l l cl ear i nghouses.
20 MR. FRI EDMAN: The poi nt I was goi ng t o make, your
21 Honor , i s t hat whi l e Eur ocl ear i s a cl ear i nghouse, t he exchange
22 bondhol der s who r ecei ve payment s t hr ough Eur ocl ear ar e exchange
23 bondhol der s i n Eur ope and t he Uni t ed St at es. The si mpl e poi nt
24 I want ed t o make f or your Honor ' s consi der at i on i s t hat we ar e
25 not speaki ng about - -
( 212) 805- 0300
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1 THE COURT: Thi s does not go t hr ough t he i ndent ur e
2 t r ust ee, does i t ?
3 MR. FRI EDMAN: That i s cor r ect , your Honor , i t does
4 not go t hr ough t he i ndent ur e t r ust ee. But t hese bonds, even
5 t hough t hey do not go t hr ough t he i ndent ur e t r ust ee, ar e not i n
6 any sense of t he wor d i nt er nal Ar gent i ne bonds, because, as
7 your Honor poi nt s out , t hey go t hr ough t he cl ear i nghouses wher e
8 t he exchange bondhol der s ar e al l over t he Uni t ed St at es and
9 Eur ope. I want t hat t o be cl ear .
10 THE COURT: Al l r i ght .
11 MR. FRI EDMAN: Your Honor , t he ot her pr act i cal poi nt
12 t hat I woul d l i ke t o addr ess, si nce t he Cour t has asked about
13 i t , i s t hat I do bel i eve we ar e t r yi ng t o be pr act i cal . Thi s
14 i s not a t echni cal ar gument we ar e pr esent i ng. What I mean by
15 t hat i s we have a si t uat i on wher e your Honor i ssued a cl ear
16 or der . I t was af f i r med by t he Second Ci r cui t . The Republ i c of
17 Ar gent i na was pr ohi bi t ed f r ompayi ng exchange bonds, pr ohi bi t ed
18 f r ompayi ng ext er nal i ndebt edness wi t hout maki ng a r at abl e
19 payment t o t he pl ai nt i f f s.
20 The r eason we ar e her e now i s t hat wi t h r espect t o t he
21 ent i r e ar r ay of exchange bonds and ext er nal i ndebt edness
22 cover ed by t he par i passu pr ovi si on, Ar gent i na has t r ansf er r ed
23 f unds t o pay ever y si ngl e one of t hem. That i s why we ar e now
24 i n a si t uat i on wher e Ci t i bank, Eur ocl ear - -
25 THE COURT: You ar e get t i ng i nt o a di f f er ent subj ect
( 212) 805- 0300
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1 mat t er . You ar e t al ki ng about t he f act t hat i ndeed t he
2 Republ i c of Ar gent i na made a t r ansf er , whet her i t was
3 500 mi l l i on or a bi l l i on, at t empt ed t o pay t hose bonds wi t hout
4 honor i ng t he par i passu cl ause. That i s a di f f er ent subj ect
5 f r omt hi s r at her mi nut e except i on t hat I amt al ki ng about down
6 i n Ar gent i na. I don' t t hi nk i t i s a good i dea t o conf use al l
7 of t hat .
8 MR. FRI EDMAN: Your Honor , f i r st l et me say, i f I may,
9 i t i s not a mi nut e si t uat i on. The U. S. dol l ar - denomi nat ed
10 exchange bonds we ar e t al ki ng about under Ar gent i ne l aw whi ch
11 ar e owned by bondhol der s al l over t he wor l d, t hose account f or
12 over 20 per cent of t he exchange bonds t hat wer e i ssued.
13 THE COURT: Say t hat agai n.
14 MR. FRI EDMAN: The uni ver se of exchange bonds consi st s
15 of U. S. dol l ar - denomi nat ed bonds under Ar gent i ne l aw, yen bonds
16 under J apanese l aw, Eur obonds under UK l aw, and U. S. dol l ar
17 bonds under New Yor k l aw. I f we l ook at t he bonds we ar e now
18 t al ki ng about , t he Ar gent i ne l aw U. S. dol l ar - denomi nat ed
19 exchange bonds, t hose ar e al most 25 per cent of t he uni ver se of
20 exchange bonds cover ed by t he amended Febr uar y 23 or der s. They
21 ar e cover ed by t he or der s. They ar e ext er nal i ndebt edness. I t
22 i s not a l i t t l e except i on.
23 THE COURT: I di dn' t r eal i ze t he per cent ages wer e t he
24 way you t al k about . Ther e i s a l ot t o do t oday. We wi l l be
25 back t o you, but I want t o hear f r omMs. Wagner . Thank you
( 212) 805- 0300
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1 ver y much.
2 MS. WAGNER: Good mor ni ng, your Honor . May i t pl ease
3 t he Cour t , Kar en Wagner f r omDavi s Pol k f or Ci t i bank. Your
4 Honor , as you have r ecogni zed, when you i ssued your i nj unct i on,
5 your opi ni on descr i bi ng t he bonds subj ect t o your i nj unct i on
6 wer e t hose t hat wer e payabl e t hr ough Bank of New Yor k Mel l on.
7 The bonds t hat we ar e her e di scussi ng r i ght now ar e
8 not i n any r espect pai d i n any way i n t he Uni t ed St at es. Those
9 bonds ar e pai d i n Ar gent i na pur suant t o l ocal l aw, t o t he KRI L,
10 whi ch i s t he l ocal r egi st r at i on and cl ear ance ent i t y i n
11 Ar gent i na. The payment s t hen go t o t he Caj a de Val or es, whi ch
12 accept s payment f r omt he r epubl i c on behal f of bot h Ci t i bank
13 and t he hol der s at Ci t i bank. Thi s i s al l l ai d out i n t he
14 af f i davi t s t hat we pr esent ed t o t he Cour t . At t hat poi nt
15 payment by t he r epubl i c and t o t he bondhol der s i s compl et e.
16 At t hat poi nt , your Honor , i t i s cer t ai nl y t r ue t hat
17 t he hol der s of t he bonds, i ncl udi ng t he Eur ocl ear syst em, can
18 t ake t he money t hey get . They ar e not r equi r ed t o keep t he
19 money i n Ar gent i na. They do what ever t hey want t o wi t h t he
20 money. But t he payment under t he bond pr ospect us and under t he
21 bond syst emhas been made t o t hem, and t hat ent i r e payment
22 pr ocess i s ent i r el y i n Ar gent i na.
23 THE COURT: I n cont r ast t o t he ot her si t uat i on - -
24 MS. WAGNER: I n ext r eme cont r ast t o t he ot her
25 si t uat i on. I n t he ot her si t uat i on payment i s made t o Bank of
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1 New Yor k, and t hen Bank of New Yor k must make t he payment t o
2 one of t he deposi t or i es, and payment by Ar gent i na i s not
3 compl et e unt i l payment t o t he deposi t or y has been made. That
4 i s t he same as i n Ar gent i na, but i n Ar gent i na i t i s made whol l y
5 i n Ar gent i na, and on t he ot her bonds i t i s made out si de of
6 Ar gent i na, i n par t i n t hi s count r y. So t her e i s a ver y, ver y
7 bi g di st i nct i on, your Honor .
8 Ther e i s no r eason why t he f act t hat your Honor
9 r ecogni zes t hat t her e i s a di f f er ence bet ween what goes on i n
10 Ar gent i na and what goes on out of Ar gent i na i s somehow goi ng t o
11 undo ever yt hi ng t hat has been done i n t hi s cour t , whi ch i s what
12 seems t o be suggest ed her e.
13 I n addi t i on, your Honor , as we have al so ar gued at
14 gr eat l engt h, Ci t i bank Ar gent i na i s i n a uni que posi t i on.
15 Nobody el se i n t hi s pr oceedi ng i s i n Ci t i bank Ar gent i na' s
16 posi t i on. Ci t i bank i s a br anch bank i n Ar gent i na. I t i s
17 subj ect t o ci vi l , r egul at or y, and cr i mi nal l aws i n Ar gent i na,
18 whi ch i t must obey. Your Honor has r ecogni zed i n past
19 deci si ons of t hi s Cour t t hat t hat put s Ci t i bank Ar gent i na i n a
20 ver y di f f er ent posi t i on t han anybody el se.
21 When we had our di scussi on t he l ast t i me we wer e her e,
22 I bel i eve t hat i s what your Honor was l i kel y t hi nki ng about .
23 We have made t hi s ar gument i n t he past and your Honor has
24 accept ed i t i n t he past . Because of t he vul ner abi l i t y of
25 Ci t i bank Ar gent i na, i t i s t r eat ed di f f er ent l y. Doct r i nes such
( 212) 805- 0300
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1 as Act of St at e and Sover ei gn Compul si on appl y t o t hat ent i t y
2 i n a way t hat t hey woul d not appl y t o an ent i t y t hat i s not
3 subj ect t o l ocal l aw.
4 THE COURT: Let me i nt er r upt you and ask, what i s t he
5 vol ume t hat we ar e t al ki ng about ?
6 MS. WAGNER: Your Honor , I hear d what you j ust hear d.
7 I di d not t hi nk i t was t hat hi gh. I need t o check t hat f or
8 you. I wi l l get back t o you. I t hought i t was smal l er . I
9 wi l l get back t o your Honor .
10 THE COURT: Go ahead.
11 MS. WAGNER: Al l i n al l , your Honor , I t hi nk t hat f or
12 a number of r easons Ci t i bank Ar gent i na and Ci t i bank have
13 pr esent ed t o you an ext r emel y di f f er ent pi ct ur e. I don' t t hi nk
14 when your Honor i ssued t he or i gi nal or der , based on t he opi ni on
15 whi ch your Honor i ssued whi ch descr i bes, as ot her opi ni ons you
16 have i ssued descr i bed, i n det ai l what t he payment i s of t he
17 bonds you ar e addr essi ng, you di scussed t he f act t hat i t i s
18 payabl e t o Bank of New Yor k Mel l on. These bonds ar e not , as
19 has been made cl ear .
20 I don' t want t o r epeat mysel f . I t i s j ust an ent i r el y
21 separ at e si t uat i on bot h i n t er ms of t he i ssuance of t he bonds,
22 payment on t he bonds, and t he f act t hat Ci t i bank Ar gent i na i s
23 act i ng as cust odi an of t he bonds f or var i ous cust omer s, some of
24 t heml ocal , some of t hemnot . But once t he money i s r ecei ved
25 by t he cust omer , t he cust omer , obvi ousl y, can do what ever i t
( 212) 805- 0300
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1 want s wi t hout i mpl i cat i ng t he payment syst emunder t he bonds.
2 For al l t hese r easons, your Honor , I t hi nk, number
3 one, t her e i s no r eason t o bel i eve t hat we shoul dn' t be t r eat ed
4 di f f er ent l y. Number t wo, i f t hese bonds ar e t r eat ed
5 di f f er ent l y and Ci t i bank Ar gent i na i s t r eat di f f er ent l y, t her e
6 i s no i mpact on anybody el se. These ar e uni que si t uat i ons, and
7 I t hi nk t her e i s no r eason why your Honor shoul d be concer ned
8 t hat somehow t hi s wi l l af f ect anyt hi ng el se i n t hi s case.
9 THE COURT: I don' t mean t hat you shoul d have i t down
10 t o t he l ast dol l ar or peso, but can' t you gi ve me an i dea of
11 t he amount i nvol ved, some i dea of t he amount i nvol ved?
12 MS. WAGNER: Your Honor , f or Ci t i bank Ar gent i na I
13 bel i eve t hat t he l ast payment t hat was made was ar ound a
14 hundr ed mi l l i on dol l ar s t ot al , t r ansl at ed. But I don' t know,
15 unf or t unat el y - -
16 THE COURT: Of i nt er est ?
17 MS. WAGNER: Of i nt er est . I don' t know how t hat
18 t r ansl at es i nt o a pr opor t i on as f ar as t he i nt er est payment s
19 acr oss t he boar d. I apol ogi ze f or t hat . I wi l l t r y t o get
20 t hat i nf or mat i on t o your Honor .
21 THE COURT: Anyt hi ng el se on t hi s mot i on?
22 MS. WAGNER: Thank you, your Honor .
23 THE COURT: Thank you ver y much, Ms. Wagner .
24 MR. FRI EDMAN: May I be hear d f or anot her mi nut e, your
25 Honor ?
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1 THE COURT: Of cour se you can.
2 MR. FRI EDMAN: Thank you.
3 Fi r st , I ' d l i ke t o addr ess one ver y i mpor t ant
4 pr act i cal consi der at i on, and t hen I woul d l i ke t o r espond
5 speci f i cal l y t o some of t he ar gument s by Ci t i bank' s counsel .
6 The pr act i cal consi der at i on, your Honor , i s I bel i eve
7 an i mpor t ant , bi g- pi ct ur e consi der at i on t hat appl i es t o t hese
8 U. S. dol l ar - denomi nat ed bonds t hat we ar e t al ki ng about . I t i s
9 si mpl y t hat , as I was st ar t i ng t o say bef or e, Ar gent i na has
10 di r ect l y vi ol at ed your Honor ' s or der and has made payment s on
11 al l of t he exchange bonds.
12 I under st and I have t o come back and addr ess your
13 Honor ' s i ssue about exchange bonds wher e t he Bank of New Yor k
14 i s not t he i ndent ur e t r ust ee. I j ust want t o be cl ear t hat
15 wher e your Honor ' s - -
16 THE COURT: What ar e you now t al ki ng about ?
17 MR. FRI EDMAN: What I ' mt al ki ng about , your Honor , i s
18 t hat we have a si t uat i on whi ch I woul d r espect f ul l y submi t has
19 ver y si gni f i cant consequences t hat ar e not l i mi t ed t o payment
20 t o Ar gent i ne ci t i zens i n Ar gent i na, a smal l por t i on of t he
21 bonds. We ar e t al ki ng about a si t uat i on wher e payment s ar e
22 made t hr ough t he cl ear i nghouses whi ch ar e speci f i cal l y
23 i dent i f i ed i n your Honor ' s amended Febr uar y 23 or der . The
24 cl ear i nghouses, as your Honor has r ul ed, st and bet ween
25 Ar gent i na and var i ous st eps and t hen t he exchange bondhol der s.
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1 The ef f ect i veness of your Honor ' s or der , whi ch has
2 been af f i r med by t he Second Ci r cui t , count s on t hi r d par t i es,
3 such as t he cl ear i nghouses, not - -
4 THE COURT: I compl et el y f ai l t o compr ehend t he poi nt
5 you ar e now maki ng. You st ar t ed out by sayi ng Ar gent i na had
6 made some ki nd of a payment . What payment ar e you t al ki ng
7 about ?
8 MR. FRI EDMAN: Your Honor , I apol ogi ze f or not bei ng
9 cl ear . The payment I ' mt al ki ng about i s t he payment t hat
10 Ar gent i na made, or I shoul d say payment s, pl ur al , t hat
11 Ar gent i na made shor t l y bef or e J une 30, 2014. These wer e
12 payment s made at a t i me when your Honor ' s i nj unct i on became
13 ef f ect i ve because - -
14 THE COURT: Can I i nt er r upt you. Those payment s wer e
15 made t o t he i ndent ur e t r ust ee, r i ght ?
16 MR. FRI EDMAN: Onl y i n par t , your Honor . I ' mal so
17 r ef er r i ng t o payment s t hat wer e made t o pay exchange bonds as
18 t o whi ch Bank of New Yor k i s not t he i ndent ur e t r ust ee.
19 THE COURT: Look, I don' t under st and what r el evance
20 t hose payment s have t o t he pr esent i ssue. Her e i s what I am
21 t al ki ng about . The r epubl i c at t empt ed t o pay t he i nt er est on
22 t he exchange bonds wi t hout compl yi ng wi t h t he r equi r ement s of
23 t he par i passu cl ause. Ther e i s no doubt i n my mi nd t hat t he
24 r epubl i c was at t empt i ng t o do t hat .
25 $500 mi l l i on or so went t o t he Bank of New Yor k as t he
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17
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1 i ndent ur e t r ust ee, and t he Bank of New Yor k ver y, ver y
2 r esponsi bl y st opped at t hat poi nt , r ecogni zi ng t hat t o concl ude
3 t he payment woul d be a vi ol at i on of t he exi st i ng or der s. I
4 don' t know t he det ai l s of any ot her payment s of t hat ki nd and I
5 don' t know how f ar t hey went , and so f or t h, but - -
6 MR. FRI EDMAN: I can addr ess t hat , your Honor , i f t hat
7 woul d be hel pf ul .
8 THE COURT: I t woul d be hel pf ul .
9 MR. FRI EDMAN: The ot her payment s t hat wer e made have
10 now come t o r est i n New Yor k and J apan. I n New Yor k, Eur ocl ear
11 i s hol di ng t he f unds i t r ecei ved f r omCi t i bank. Eur ocl ear i s
12 wai t i ng t o di st r i but e t hose f unds t o exchange bondhol der s i n
13 t he Uni t ed St at es and Eur ope who hol d Ar gent i ne l aw U. S.
14 dol l ar - denomi nat ed exchange bonds.
15 So, i n addi t i on t o Ar gent i na - -
16 THE COURT: You ar e get t i ng beyond my quest i on. What
17 I amt al ki ng about i s speci f i cal l y one t hi ng, and t hat i s t he
18 at t empt by t he r epubl i c t o pay t he i nt er est t o t he exchanges
19 t hat was due on J une 30 and i gnor e t he obl i gat i ons under t he
20 par i passu cl ause. That i s what I amt al ki ng about . What
21 happened was, I guess we have sai d t hi s sever al t i mes t hi s
22 mor ni ng, t he Bank of New Yor k act ed ver y r esponsi bl y and di d
23 not compl et e t he payment . I t hel d t he money i n r egar d f or my
24 or der . That was a ver y r esponsi bl e t hi ng f or t hemt o do.
25 That was about 500 mi l l i on. I never was pr esent ed
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1 wi t h f act s or any appl i cat i ons, t o my knowl edge, about maybe
2 anot her 500 mi l l i on or so. That i s as f ar as my knowl edge went
3 and as f ar as my act i on went and as f ar as what I under st ood
4 t he Bank of New Yor k' s si t uat i on went .
5 What I don' t under st and i s why any of t hat i s r el evant
6 t o t he si t uat i on i nvol ved i n t he mot i on now bei ng consi der ed,
7 whi ch i nvol ves dol l ar bonds, not peso bonds but some dol l ar
8 bonds, i ssued by t he r epubl i c, payabl e i n Ar gent i na, as I
9 under st and i t , not payabl e t hr ough t he i ndent ur e t r ust ee or any
10 si mi l ar . Payabl e i n Ar gent i na.
11 I t doesn' t hel p me t o t al k about anot her ki nd of
12 payment . Thi s seems t o me a di f f er ent ki nd of payment t han I
13 have deal t wi t h i n t he past and you have r ef er r ed t o. Thi s i s
14 a di f f er ent ki nd of payment , i s i t not ?
15 MR. FRI EDMAN: I t i s di f f er ent f r omt he payment t o
16 Bank of New Yor k. But i f I may cl ar i f y, your Honor , I bel i eve
17 t her e i s a ver y i mpor t ant poi nt concer ni ng t he amended Febr uar y
18 23 or der s and t he par i passu pr ovi si on whi ch maybe I have not
19 ar t i cul at ed as cl ear l y as I shoul d.
20 The si mpl e poi nt i s t hat t he amended Febr uar y 23 or der
21 cover s bonds i ssued i n t he 2005 and 2010 exchanges. For some
22 of t hose bonds, but not al l , payment s ar e t hr ough Bank of New
23 Yor k as a i ndent ur e t r ust ee. The par i passu pr ovi si on and t he
24 amended Febr uar y 23 or der s pr ohi bi t payment s on any exchange
25 bonds wi t hout maki ng a r at abl e payment .
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1 THE COURT: Say t hat mor e sl owl y. Go over t hat ver y
2 car ef ul l y.
3 MR. FRI EDMAN: Yes. The amended Febr uar y 23 or der s
4 and t he par i passu pr ovi si on i t sel f pr ohi bi t payment s by
5 Ar gent i na on any exchange bonds unl ess Ar gent i na makes a
6 r at abl e payment t o t he pl ai nt i f f s. I n t hose or der s and i n t he
7 par i passu pr ovi si on i t sel f , exchange bonds const i t ut e al l t he
8 bonds i ssued i n t he 2005 and 2010 exchanges.
9 For some of t hose bonds, payment s ar e t hr ough Bank of
10 New Yor k as i ndent ur e t r ust ee. For ot her s of t hose bonds,
11 payment s move i n a di f f er ent pat h or pr ocess, but t hey ar e
12 st i l l cl ear l y cover ed by t he amended Febr uar y 23 or der .
13 THE COURT: St ep back.
14 MR. FRI EDMAN: Sur e.
15 THE COURT: You have sai d t hi s about t hr ee t i mes. I
16 want t o f ol l ow up. Summar i ze t he pr ovi si ons of t he Febr uar y 23
17 j ust once mor e, and I want t o f ol l ow up.
18 MR. FRI EDMAN: Sur e. Ther e ar e t wo i mpor t ant
19 pr ovi si ons. One i s par agr aph 2( a) . Par agr aph 2( a) says t hat
20 i f t he r epubl i c makes a payment on any of t he exchange bonds,
21 t he r epubl i c must i n advance or concur r ent l y made a r at abl e
22 payment t o pl ai nt i f f s.
23 THE COURT: Let me i nt er r upt you.
24 MR. FRI EDMAN: Yes.
25 THE COURT: Ar e t he bonds we ar e t al ki ng about i n t hi s
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20
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1 mot i on exchange bonds?
2 MR. FRI EDMAN: Yes, your Honor , no quest i on about
3 t hat . No quest i on about t hat . These U. S. dol l ar - denomi nat ed
4 bonds - -
5 THE COURT: When was t he exchange?
6 MR. FRI EDMAN: These wer e par t of t he l ar ger 2005 and
7 2010 exchange. Ther e i s no di sput e about t hat .
9 MR. FRI EDMAN: The U. S. dol l ar - denomi nat ed bonds
10 i ssued under Ar gent i ne l aw wer e par t of t he exchange bonds
11 i ssued i n t he 2005 and 2010 exchanges. Ther e i s no di sput e
12 about t hat . These ar e exchange bonds i n ever y sense of t he
13 wor d.
14 THE COURT: Can I t hen i nt er r upt you.
15 Ms. Wagner , l et me go back t o you. Does t hat not
16 mean, t hen, t hat t hese bonds ar e cover ed by t he Febr uar y 23
17 or der ?
18 MS. WAGNER: Your Honor , when you i ssued t he
19 i nj unct i on, you i ssued or der s cover i ng exchange bonds and you
20 i ssued an opi ni on descr i bi ng t he basi s f or t he i nj unct i on. The
21 opi ni on descr i bes bonds f or whi ch payment i s made t hr ough Bank
22 of New Yor k. The or der cover s exchange bonds. Our bonds ar e
23 i ndeed exchange bonds, and t hat i s why we sought cl ar i f i cat i on.
24 I t was our vi ew t hat , number one, t her e was no
25 descr i pt i on of any of our bonds i n t he opi ni on descr i bi ng t he
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21
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1 basi s f or t he or der . The opi ni on descr i bes t he Bank of New
2 Yor k bonds. But we, i n an excess of caut i on, sai d exchange
3 bonds does i ncl ude our bonds, we shoul d f i nd out , we shoul d
4 cl ar i f y whet her t he Cour t r eal l y i nt end t o cover us. So we
5 made a mot i on f or cl ar i f i cat i on.
6 We don' t t hi nk t he Cour t i nt ended us t o be cover ed.
7 Ther e i s cer t ai nl y no ment i on i n t he or der s of Ci t i bank or KRI L
8 or t he Caj a whi ch you woul d expect t o see i f i n f act t hat
9 ser i es of payment s was i nt ended t o be pr ohi bi t ed.
10 Al so, your Honor , we t hought t hen and we t hi nk now
11 t hat as a mat t er of l aw i t woul d not be appr opr i at e t o i ncl ude
12 t hese bonds i n t hat or der , because, and I t hi nk t her e i s no
13 di sput e her e, t hey ar e pai d by t he r epubl i c i n Ar gent i na and
14 payment i s r ecei ved by t he hol der s i n Ar gent i na.
15 For t hat r eason as wel l , and f or t he t hi r d r eason t hat
16 Ci t i bank Ar gent i na i s a br anch bank i n Ar gent i na, we bel i eve
17 t hat i f your Honor had i t i n mi nd at al l t o t hi nk about t hese
18 bonds, whi ch was unl i kel y, because t hey wer e not r ai sed t o your
19 Honor ' s at t ent i on dur i ng t he pr ocess by whi ch t hese i nj unct i ons
20 wer e i ssued, i f your Honor had t hought about i t and i f we had
21 been t her e, we woul d have expl ai ned as a mat t er of l aw why t hey
22 shoul d not be cover ed.
23 We ar e st i l l of t he vi ew, your Honor , number one, t hat
24 you wer e not consi der i ng t hese bonds when you i ssued t he or der .
25 Number t wo, you shoul dn' t put t hese bonds i n t he or der f or t he
( 212) 805- 0300
22
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1 r easons t hat we have ar t i cul at ed. Number t hr ee - -
2 THE COURT: Let ' s sl ow down. Thi s i s pr obabl y
3 somet hi ng t hat I di dn' t gi ve at t ent i on t o at t he t i me. Now i t
4 has t o be gi ven at t ent i on. Let ' s st ar t one st ep at a t i me and
5 go t hr ough your r easoni ng. These bonds t hat we ar e t al ki ng
6 about ar e exchange bonds, r i ght ?
7 MS. WAGNER: Yes.
8 THE COURT: They wer e par t of t he 2005 or t he 2010 or
9 bot h, r i ght ?
10 MS. WAGNER: Yes.
11 THE COURT: Si t t i ng her e r i ght now and r ecogni zi ng
12 t hat I may have ver y wel l not cover ed t hi ngs t hat shoul d have
13 been cover ed, but si t t i ng her e r i ght now i t st r i kes me t hat ,
14 bei ng exchange bonds, t hey shoul d be t r eat ed as exchange bonds
15 and t hat t hey shoul d be i ncl uded wi t h t he ot her exchange bonds
16 i n t he Febr uar y 23 or der . That i s t he way i t st r i kes me now.
17 I ' mnot t r yi ng t o r evi ew ever yt hi ng t hat I ' ve gone over . Why
18 shoul d t hat not be t he case?
19 MS. WAGNER: Your Honor , we woul d ar gue r espect f ul l y
20 t hat i t shoul d not be t he case, f or t wo r easons. One, because
21 t he bonds ar e i ssued i n Ar gent i na pur suant t o l ocal l aws, not
22 pur suant t o an i ndent ur e. Ther e i s no subj ect i on t o U. S.
23 j ur i sdi ct i on. They ar e payabl e whol l y i n Ar gent i na.
24 For t hat r eason, var i ous doct r i nes, such as Act of
25 St at e and Sover ei gn Compul si on, woul d suggest t hat your Honor
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1 shoul d not be r eachi ng i nt er nal Ar gent i ne pr ocesses wi t h an
2 or der of t hi s Cour t . That woul d be t he mai n ar gument f or why
3 t hese bonds, even t hough t hey ar e exchange bonds, shoul d not be
4 i ncl uded i n your Honor ' s i nj unct i on or der .
5 The second ar gument i s t hat because Ci t i bank Ar gent i na
6 i s t he cust odi an, Ci t i bank Ar gent i na shoul d not be subj ect ed t o
7 i nj unct i ons t hat r equi r e i t t o r est r ai n pr oper t y whi ch bel ongs
8 t o cust omer s i n a count r y wher e t hey ar e subj ect t o Ar gent i ne
9 l aw and wi l l be subj ect t o bot h ci vi l , r egul at or y, and cr i mi nal
10 pr ocess i f t hey r est r ai n payment t o t hei r cust omer s.
11 Those ar e t he t wo r easons, your Honor , one havi ng t o
12 do wi t h what t he bonds ar e and one havi ng t o do wi t h who
13 Ci t i bank Ar gent i na i s, t hat we t hi nk as a mat t er of l aw i t i s
14 not appr opr i at e t o i ncl ude t hese bonds i n t he i nj unct i on or der .
15 We woul d r ef er your Honor agai n t o some of your pr i or
16 deci si ons, t he one on t he Boden bonds and t he one on t he Onsess
17 pensi on payment s i n whi ch Ci t i bank Ar gent i na made si mi l ar
18 ar gument s whi ch your Honor accept ed. They wer e not , obvi ousl y,
19 i dent i cal f act si t uat i ons, but t he l egal anal ysi s was t he same.
20 THE COURT: The t hi ng t hat concer ns me i s t hat as a
21 gener al pr oposi t i on, t he Febr uar y 23 or der deal t wi t h t he
22 exchange bonds. I t di d, of cour se.
23 MS. WAGNER: I t di d, your Honor , yes.
24 THE COURT: Wi t hout doubt . Focusi ng agai n on t he
25 Febr uar y 23 or der , f ocusi ng t her e, I di d not make any
( 212) 805- 0300
24
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1 except i ons i n t hat or der , r i ght ?
2 MS. WAGNER: That i s cor r ect , your Honor . I woul d
3 r ef er you back t o your opi ni on i ssued on t he same day, whi ch
4 does descr i be t he bond t hat you wer e t al ki ng about at t hat
5 t i me.
6 THE COURT: What i s t hat l anguage?
7 MS. WAGNER: Let me r ead you a l i t t l e bi t of i t .
8 " The pr ocess and t he par t i es i nvol ved i n maki ng
9 payment s on t he exchange bonds ar e as f ol l ows. Ar gent i na
10 t r ansf er s f unds t o t he Bank of New Yor k Mel l on, whi ch i s t he
11 i ndent ur e t r ust ee i n a t r ust i ndent ur e of 2005. Pr esumabl y,
12 t her e i s a si mi l ar i ndent ur e f or t he 2010 exchange of f er . BNY
13 t hen f or war ds t he f unds t o t he r egi st er ed owner of exchange
14 bonds. Ther e ar e t wo r egi st er ed owner s f or t he 2005 and 2010
15 exchange bonds. One i s CD & Company and t he ot her i s Bank of
16 New Yor k deposi t or y. CD and BNY deposi t or i es t r ansf er t he
17 f unds t o a cl ear i ng syst em, such as t he Deposi t or y Tr ust
18 Company. The f unds ar e t hen deposi t ed i nt o f i nanci al
19 i nst i t ut i ons, appar ent l y banks, whi ch t hen t r ansf er t he f unds
20 t o t hei r cust omer s, who ar e t he benef i ci al i nt er est hol der s of
21 t he bonds. "
22 Your Honor , j ust r eadi ng t hat descr i pt i on, t her e i s no
23 r eason t o t hi nk t hat t he Ar gent i ne l aw bonds wer e par t of t hi s
24 or der . I t i s absol ut el y t r ue t hat f or exchange bonds t he wor ds
25 i n t he or der di dn' t make an except i on. But t hi s opi ni on i s
( 212) 805- 0300
25
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1 ver y cl ear l y about t hese bonds, whi ch cl ear l y does not i ncl ude
2 t he Ar gent i ne l aw bonds
3 THE COURT: The i ssues r ai sed t oday I haven' t r eal l y
4 deal t wi t h i n any opi ni on, so I have t o r eser ve deci si on on t he
5 mot i on bef or e me. Thank you al l ver y much. Let ' s go on t o t he
6 next .
7 MS. WAGNER: Thank you, your Honor .
8 MR. FRI EDMAN: Your Honor , i f I mi ght suggest , i t
9 pr obabl y makes sense next t o consi der t he mot i ons f or
10 cl ar i f i cat i on by Eur ocl ear and Cl ear st r eam, si nce t hose mot i ons
11 ar e based on your Honor ' s or der .
12 THE COURT: I wi l l r eser ve deci si on. What comes next ?
13 MR. FRI EDMAN: I bel i eve what comes next , and your
14 Honor may f eel t he same way, we have a l et t er mot i on f or
15 cl ar i f i cat i on t hat was made by J PMor gan r el at i ng t o t he yen-
16 denomi nat ed exchange amount .
17 THE COURT: I wi l l r eser ve deci si on.
18 MR. FRI EDMAN: The posi t i ons ar e set f or t h i n l et t er s
19 t hat your Honor has.
20 I bel i eve t hat br i ngs us t o t he Bank of New Yor k
21 mot i on f or cl ar i f i cat i on. Ther e i s al so a eur o bondhol der
22 mot i on f or cl ar i f i cat i on.
23 THE COURT: Who want s t o speak on t hose mot i ons?
24 MR. FRI EDMAN: On t he Bank of New Yor k mot i on, t hei r
25 counsel i s her e. May I say one t hi ng f i r st , your Honor ?
( 212) 805- 0300
26
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1 THE COURT: Of cour se.
2 MR. FRI EDMAN: Thi s wi l l come a l i t t l e out of l ef t
3 f i el d, but I woul d l i ke t o say i t f or t he r ecor d t o pr ot ect t he
4 r i ght s of my cl i ent s and al l t he pl ai nt i f f s i n t hese cases
5 wher e par i passu i nj unct i ons have been i ssued.
6 I ment i oned t hat payment s on t he U. S. dol l ar Ar gent i ne
7 l aw bonds have been t r ansf er r ed i n par t t o Eur ocl ear and t hose
8 f unds ar e now si t t i ng i n a Eur ocl ear bank account i n New Yor k.
9 I ' msur e your Honor has consi der ed, and your Honor has
10 expr essed vi ews and we don' t di sput e t hose vi ews, as t o what
11 shoul d happen wi t h f unds t hat t he Cour t det er mi nes wer e
12 i mpr oper l y pai d. We ar e t ot al l y r espect f ul of t hat .
13 For t he r ecor d, and j ust t o avoi d what may be a f l ur r y
14 of l i t i gat i on, I want t o put a mot i on on t he r ecor d, wi t h t he
15 under st andi ng t hat your Honor wi l l deny i t .
16 THE COURT: Let me i nt er r upt you. We' l l get back t o
17 you. Thi s r ecaps what you have sai d, but l et me do i t . About
18 500 mi l l i on was pai d t o t he Bank of New Yor k, and t he Bank of
19 New Yor k has hel d on t o t hat , r i ght ?
20 MR. FRI EDMAN: Yes, your Honor .
21 THE COURT: What ot her f unds ar e you t al ki ng about ,
22 pai d t o whom? I di dn' t f ol l ow you compl et el y.
23 MR. FRI EDMAN: I apol ogi ze, your Honor . Ar e you
24 aski ng a quest i on about what we wer e di scussi ng ear l i er or a
25 quest i on about what I was j ust sayi ng t hi s mi nut e?
( 212) 805- 0300
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1 THE COURT: What you wer e j ust sayi ng.
2 MR. FRI EDMAN: I apol ogi ze. What I was sayi ng t hi s
3 mi nut e was t hat wi t h r espect t o t he U. S. dol l ar - denomi nat ed
4 Ar gent i ne l aw exchange bonds wher e Ci t i bank r ecei ved payment s,
5 some of t he f unds r ecei ved by Ci t i bank have been t r ansf er r ed
6 al ong t he payment chai n t o Eur ocl ear and Eur ocl ear woul d t hen
7 di st r i but e t he f unds t o exchange bondhol der s. Thi s i s a
8 t echni cal poi nt I j ust want t o have on t he r ecor d.
9 The f unds hel d by Eur ocl ear ar e now i n a Eur ocl ear
10 bank account at Ci t i bank i n New Yor k, f or t he r ecor d - -
11 THE COURT: Let me i nt er r upt you. I want t o go back
12 t o t he at t empt by t he r epubl i c t o make i nt er est payment s as of
13 J une 30, when t hey pai d about $500 mi l l i on t o t he i ndent ur e
14 t r ust ee. We had a hear i ng about t hat . We al l know what
15 happened t her e. Di d t he r epubl i c - - maybe you cover ed i t
16 t oday, but f or gi ve me - - pay anot her 500 mi l l i on or so as par t
17 of t hat exer ci se?
18 MR. FRI EDMAN: The i nf or mat i on we have, my
19 under st andi ng, i s t hat i t was not as much as anot her
20 500 mi l l i on. My under st andi ng i s t hat t he amount pai d t o Bank
21 of New Yor k was 539 mi l l i on. I bel i eve t he addi t i onal amount s
22 pai d by t he r epubl i c wer e somewhat i n excess of 200 mi l l i on,
23 cl ose t o 300.
24 THE COURT: What ever t he amount was t o what
25 i nst i t ut i on or bank or what ever , who was i t pai d t o?
( 212) 805- 0300
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1 MR. FRI EDMAN: As we under st and t he f act s now, your
2 Honor , t her e ar e t wo ot her i nst i t ut i ons i nvol ved r egar di ng t he
3 payment s. One i s Ci t i bank, whi ch we have j ust been di scussi ng
4 as t he r eci pi ent of payment s on t he U. S. dol l ar - denomi nat ed
5 exchange bonds, and t he ot her i s J PMor gan Chase Bank, whi ch has
6 di scl osed i n a l et t er f i l ed wi t h t he Cour t t hat i t r ecei ved
7 payment s i n J apan on exchange bonds t hat had been i ssued under
8 J apanese l aw.
9 So, t he ext ent of our knowl edge about t he r epubl i c' s
10 at t empt s t o make payment s on exchange bonds i s t he Bank of New
11 Yor k wi t h 539 mi l l i on, Ci t i bank wi t h somewhat mor e t han
12 200 mi l l i on, t hat i s an appr oxi mat i on, and J PMor gan, whi ch has
13 sai d i t r ecei ved j ust about 2 mi l l i on f or payment of yen-
14 denomi nat ed exchange bonds.
15 THE COURT: I don' t want t o get conf used bet ween t wo
16 t hi ngs. Ther e ar e t wo t hi ngs t hat I have i n mi nd t hat have
17 r ai sed i ssues. One i s t he at t empt by t he r epubl i c t o make
18 payment t o t he exchanger s of i nt er est as of J une 30. That ' s
19 one t hi ng. That i nvol ved t he payment t o t he Bank of New Yor k,
20 and so f or t h.
21 The ot her t hi ng i s what I under st and t o be somet hi ng
22 di st i nct , al t hough maybe t her e i s an ar gument about i t not
23 bei ng so di st i nct , but t he ot her t hi ng t hat we have di scussed
24 t hi s mor ni ng i s t he si t uat i on i n Ar gent i na, whi ch we have
25 di scussed and I won' t t r y t o r ecap al l t hat .
( 212) 805- 0300
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1 My under st andi ng i s t hat t he t wo t hi ngs ar e di f f er ent .
2 I n ot her wor ds, t he r epubl i c was t r yi ng t o pay t he i nt er est t o
3 t he exchanger s; second, t he r epubl i c i s t r yi ng t o deal wi t h
4 bonds i ssued i n Ar gent i na, payabl e i n Ar gent i na, and so f or t h.
5 Now I want t o t al k about t he f i r st . I hope I have
6 t hemi n decent cat egor i es. I t hi nk you have answer ed t hi s, but
7 I ' mgoi ng t o ask you agai n. How much money was pai d when t he
8 r epubl i c at t empt ed t o make t he i nt er est payment s t o t he
9 exchanger s on or about J une 30t h? We know about t he 500- pl us
10 mi l l i on dol l ar s t hat went t o Bank of New Yor k. You pr obabl y
11 sai d t hi s 15 t i mes t oday, but pl ease, agai n, what ot her
12 payment s wer e made i n t he cat egor y I ' mt al ki ng about ?
13 MR. FRI EDMAN: The number , t he t ot al number , i ncl udi ng
14 t he 539 mi l l i on t o Bank of New Yor k, I bel i eve i s 832 mi l l i on.
15 But I bel i eve we may, your Honor , have a di sconnect about t he
16 cat egor i es. The 832 mi l l i on whi ch I r ef er t o as Ar gent i na' s
17 at t empt i ng t o pay t he exchanger s, t hat does i ncl ude t he payment
18 t o Ci t i bank f or t he exchange bonds i ssued under Ar gent i ne l aw
19 t hat we have been di scussi ng.
20 THE COURT: Put asi de Ci t i bank f or a mi nut e. What
21 ot her i nst i t ut i ons r ecei ved money i n connect i on wi t h what you
22 have j ust t al ked about ?
23 MR. FRI EDMAN: I f we put asi de Ci t i bank and i f we put
24 asi de t he Bank of New Yor k, t he onl y ot her i nf or mat i on we have
25 i s $2. 1 mi l l i on t hat i s bei ng hel d by J PMor gan Chase Bank i n
( 212) 805- 0300
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1 J apan, wher e i t was r ecei ved f or payment on yen- denomi nat ed
2 exchange bonds.
3 THE COURT: Say t hat agai n, pl ease.
4 MR. FRI EDMAN: Yes. When we t al k about t he
5 exchanger s, we ar e t al ki ng about bondhol der s who have exchange
6 bonds i ssued under var i ous l aws, and some of t he exchanger s
7 hol d yen- denomi nat ed exchange bonds t hat wer e i ssued under
8 J apanese l aw.
9 We know, based on t he l et t er f i l ed by J PMor gan Chase,
10 t hat t he r epubl i c has at t empt ed t o make an i nt er est payment as
11 of J une 30 i n t he amount of $2. 1 mi l l i on on t he yen- denomi nat ed
12 exchange bonds. Those f unds ar e cur r ent l y bei ng hel d at
13 J PMor gan Chase Bank i n J apan.
14 THE COURT: Bef or e we get t o J PMor gan Chase i n J apan,
15 t he ot her bl ocks ar e - - pl ease f or gi ve me. Repeat i t .
16 MR. FRI EDMAN: The ot her bl ocks, your Honor , ar e t he
17 Bank of New Yor k and Ci t i bank. Those ar e t he onl y r eci pi ent s.
18 THE COURT: Ci t i bank i n Ar gent i na?
19 MR. FRI EDMAN: The payment went t o Ci t i bank i n
20 Ar gent i na, and f r omt her e t o New Yor k and ot her pl aces wi t h
21 r espect t o t he U. S. dol l ar - denomi nat ed bonds.
22 THE COURT: The amount bei ng?
23 MR. FRI EDMAN: I bel i eve t hat t he amount pai d t o
24 Ci t i bank i n Ar gent i na i s somewher e bet ween 200 mi l l i on and
25 300 mi l l i on. I don' t have an exact f i gur e.
( 212) 805- 0300
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1 THE COURT: Do you know wher e t hat money i s now on
2 deposi t ?
3 MR. FRI EDMAN: I n par t , yes, your Honor . Par t of t hat
4 money i s now on deposi t i n t he account of Eur ocl ear Bank i n New
5 Yor k, at Eur ocl ear Bank' s account i n New Yor k at Ci t i bank N. A.
6 THE COURT: I s t hat bei ng hel d?
7 MR. FRI EDMAN: Eur ocl ear has hel d t hat money and
8 Eur ocl ear has asked f or per mi ssi on t o pass t hat money on t o t he
9 exchange bondhol der s i n t he U. S. and Eur ope who hol d t he
10 Ar gent i ne l aw U. S. denomi nat ed exchange bonds.
11 THE COURT: I shoul d have wr i t t en i t down. That
12 ent i t y i s cal l ed what ?
13 MR. FRI EDMAN: Eur ocl ear Bank, your Honor .
14 THE COURT: Eur ocl ear . Asi de f r omEur ocl ear , ar e
15 t her e any of t he f unds i n t he cat egor y we ar e t al ki ng about ?
16 MR. FRI EDMAN: Not t hat I know of , your Honor .
17 THE COURT: So i t i s r eal l y what went t o Bank of New
18 Yor k and what went f r omCi t i bank t o Eur ocl ear , r i ght ?
19 MR. FRI EDMAN: Yes, your Honor .
20 THE COURT: I s t he l at t er bei ng hel d?
21 MR. FRI EDMAN: We have been t ol d by Eur ocl ear yes,
22 t hat Eur ocl ear at t hi s t i me i s hol di ng t he money.
23 THE COURT: I t hi nk we st ar t ed t hi s di scussi on because
24 t her e was some mot i on by you, r i ght ?
25 MR. FRI EDMAN: Yes. I apol ogi ze, your Honor . I f I
( 212) 805- 0300
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1 may, t hi s i s a ver y t echni cal mat t er . I ' mdoi ng t hi s hopef ul l y
2 t o avoi d f ur t her pr oceedi ngs and compl exi t y. As I say, I f ul l y
3 under st and t hat your Honor wi l l not l ook f avor abl y upon t hi s
4 mot i on and wi l l , I ant i ci pat e, deny i t . But j ust i n case, f or
5 t he r ecor d, I want t o make, on behal f of t he pl ai nt i f f s i n t he
6 cases wher e we have par i passu i nj unct i ons, a mot i on f or
7 at t achment wi t h r espect t o t he f unds hel d by Eur ocl ear i n New
8 Yor k.
9 The r eason I say t hat i s we don' t want t o see a bi g
10 f i ght wi t h l ot s of ot her cr edi t or s comi ng i n and mul t i pl yi ng
11 t he pr oceedi ngs. I f f or some r eason your Honor shoul d deci de
12 t hat t hi s sor t of at t achment i s appr opr i at e, we si mpl y want ed
13 t o make t he f i r st mot i on and have t he pr i or i t y t hat goes wi t h
14 i t . I say wi t h f ul l under st andi ng t hat - -
15 THE COURT: Has t hat been par t of t he br i ef i ng bef or e
16 me?
17 MR. FRI EDMAN: No, your Honor . Thi s came up onl y
18 because yest er day f or t he f i r st t i me i t was di scl osed t hat
19 si gni f i cant f unds went f r omCi t i bank i n Ar gent i na t o Eur ocl ear
20 i n New Yor k. Yest er day, when we saw t he Eur ocl ear paper , t hat
21 was t he f i r st t i me we knew t hat t her e wer e f unds i n New Yor k.
22 I f ul l y appr eci at e t hat your Honor has expr essed t he
23 vi ew t hat i l l egal payment s by Ar gent i na shoul d be r et ur ned. I
24 know your Honor does not want t o see a l ot of l i t i gat i on about
25 f unds i n t hi s cour t or ot her j ur i sdi ct i ons. But I j ust want ed
( 212) 805- 0300
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1 t o put t hat mot i on on t he r ecor d so t hat ( a) we woul d have
2 pr i or i t y and ( b) hopef ul l y i t wi l l f or est al l f ur t her l i t i gat i on
3 by ot her cr edi t or s who mi ght ot her wi se be r unni ng i nt o cour t .
4 THE COURT: I f you have a r i ght t o an at t achment , you
5 have a r i ght t o an at t achment . I don' t car r y i n my mi nd al l
6 t he t hi ngs t hat you have t o show t o get an at t achment . I t
7 seems t o me t hat t her e ar e gr ounds under st at e l aw f or
8 at t achment s. I t seems t o me i f you f i l e a mot i on, I ' l l handl e
9 t hat ver y qui ckl y. I f t her e ar e gr ounds f or t he at t achment ,
10 t he at t achment wi l l be al l owed.
11 Does t hat compl et e your mot i ons?
12 MR. FRI EDMAN: That compl et es, your Honor , t he mot i on
13 f or par t i al r econsi der at i on wi t h r espect t o Ci t i bank. And yes,
14 I appr eci at e t he oppor t uni t y t o make t hat at t achment mot i on on
15 t he r ecor d. I bel i eve we have al r eady di scussed t he mot i ons by
16 Eur ocl ear and Cl ear st r eamf or cl ar i f i cat i on, whi ch ar e based on
17 t he Ci t i bank or der .
18 THE COURT: On al l t hat , deci si on i s r eser ved.
19 MR. FRI EDMAN: Yes. I under st and your Honor al so
20 r eser ved deci si on on t he J PMor gan mot i on, whi ch we t al ked about
21 br i ef l y. That br i ngs us, as I under st and i t , t o t he Bank of
22 New Yor k, wher e I bel i eve t he i ssue si mpl y i s t he pr oper f or m
23 of or der t o be ent er ed by your Honor . I n ot her wor ds, t he Bank
24 of New Yor k i s hol di ng i n i t s account at t he Cent r al Bank of
25 Ar gent i na t he $539 mi l l i on dol l ar s.
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1 THE COURT: Hol di ng wher e?
2 MR. FRI EDMAN: The Bank of New Yor k i s hol di ng
3 $539 mi l l i on at t he Bank of New Yor k' s account at t he Cent r al
4 Bank of Ar gent i na. That i s wher e t he Bank of New Yor k has
5 advi sed t he f unds ar e bei ng hel d.
6 THE COURT: Let ' s concl ude. Thank you. You have been
7 ver y hel pf ul .
8 MR. VASSOS: Your Honor , i f I coul d j ust a moment on
9 t he l ast mot i on bef or e movi ng on?
11 MR. VASSOS: Thank you. J ohn Vassos of Mor gan Lewi s &
12 Bocki us on behal f of Cl ear st r eam.
13 Your Honor , I want ed t o make a coupl e of poi nt s of
14 cl ar i f i cat i on. Your Honor asked Mr . Fr i edman wher e t he money
15 f r omAr gent i na went , and he sai d Eur ocl ear . Money has al so
16 gone t o my cl i ent , Cl ear st r eam. I want t hat t o be cl ear on t he
17 r ecor d t o make sur e your Honor has al l t he i nf or mat i on.
18 The onl y ot her poi nt I have, your Honor , and I t hi nk
19 i t i s one act ual l y and r ar el y not i n di sput e, pl ai nt i f f s i n
20 t hei r paper s deal i ng wi t h t he Ci t i bank r ehear i ng has sai d t hat
21 t hey concede t hat payment s i n Ar gent i na peso- denomi nat ed bonds
22 ar e not subj ect t o t he i nj unct i on and can be made.
23 To t he ext ent t hat money has gone t hr ough Ci t i bank
24 Ar gent i na t o my cl i ent and I bel i eve al so t o Eur ocl ear on
25 peso- denomi nat ed bonds, i f t her e i s no di sput e about t hat and
( 212) 805- 0300
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1 we ar e hol di ng t hat money as t he cl ear i nghouse, I woul d ask
2 t hat we be gi ven per mi ssi on t o pass t hat money on t o t he
3 i nvest or s.
4 MR. FRI EDMAN: Your Honor , may I addr ess t hat ?
5 THE COURT: Ri ght .
6 MR. FRI EDMAN: I agr ee, pl ai nt i f f s ar e not chal l engi ng
7 your Honor ' s Ci t i bank or der wi t h r espect t o t he peso-
8 denomi nat ed bonds. We woul d agr ee t hat Ci t i bank can pass on
9 t hose payment s and t hat when Eur ocl ear and Cl ear st r eamr ecei ve
10 payment s on t he peso- denomi nat ed bonds, t hey may pass on t he
11 payment s t o t he exchange bonds.
12 THE COURT: Of cour se. Thank you ver y much.
13 MS. WAGNER: Your Honor , may I be hear d f or one
14 moment ?
16 MS. WAGNER: Kar en Wagner agai n. Your Honor , t o t he
17 best of our knowl edge, Mr . Fr i edman' s number s ar e not qui t e
18 cor r ect . Al so, t he Eur ocl ear f unds ar e not bei ng hel d at
19 Ci t i bank. We wi l l get t he cor r ect number s t o t he Cour t .
20 THE COURT: I f t her e i s anyt hi ng t hat needs
21 cor r ect i ng, t her e i s t he U. S. mai l .
22 MS. WAGNER: Thank you, your Honor , yes.
23 MR. VASSOS: On t he peso- denomi nat ed bonds, your
24 Honor , what we wi l l do i s dr af t up a pr oposed or der , submi t i t
25 t o t he par t y, and hen hopef ul l y submi t i t t o t he Cour t .
( 212) 805- 0300
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1 THE COURT: Anybody el se?
2 MR. CLARK: Chr i s Cl ar k f or t he eur o bondhol der s. I f
3 i t pl ease t he Cour t , I t hi nk i f we addr essed our mot i on bef or e
4 t he Bank of New Yor k' s, i t mi ght make mor e l ogi cal sense. But
5 we wi l l def er t o what ever t he Cour t desi r es.
7 MR. CLARK: Chr i s Cl ar k f or t he eur o bondhol der s. We
8 have made a mot i on f or cl ar i f i cat i on. I t hi nk i t mi ght make
9 mor e l ogi cal sense i f we addr ess i t bef or e Bank of New Yor k
10 addr esses t hei r mot i on f or cl ar i f i cat i on.
11 THE COURT: Ver y good.
12 MR. CLARK: Thank you, your Honor .
13 THE COURT: That concl udes deal i ng wi t h t he mot i ons.
14 I want t o now di scuss somet hi ng el se.
15 Do you have anyt hi ng?
16 MR. CLARK: That somet hi ng el se woul d be my mot i on or
17 somet hi ng f r omyour Honor ?
18 THE COURT: I f t her e i s anot her mot i on, make your
19 mot i on.
20 MR. CLARK: Thank you, your Honor . We move t he Cour t
21 t o cl ar i f y t he i nj unct i on t o t he ext ent t hat i t br i ngs i nt o i t s
22 sway bonds gover ned by non- U. S. l aw and t hat i t bi nds f or ei gn
23 par t i es who act sol el y out si de t he Uni t ed St at es not subj ect t o
24 t he j ur i sdi ct i on of t hi s Cour t .
25 Fi r st of al l , I want t o say, your Honor , we don' t
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1 condone or we di dn' t par t i ci pat e i n or ask f or i n any way
2 Ar gent i na t o make t he payment i n quest i on t o Bank of New Yor k.
3 However , we have i nvest or s, your Honor , i n t he var i ous f unds
4 t hat I r epr esent .
5 THE COURT: You r epr esent who?
6 MR. CLARK: I r epr esent a gr oup of f unds who owned
7 eur o- denomi nat ed exchange bonds whi ch ar e pai d i n eur o and
8 gover ned by Engl i sh l aw. We ar e her e, your Honor , t o r equest
9 t hat you cl ar i f y t he or der so t hat at t he ver y l east t he
10 f or ei gn par t i es over whomyou don' t have j ur i sdi ct i on ar e not
11 subj ect t o t he or der ' s di ct at es.
12 THE COURT: The cr uci al t hi ng i s t he Cour t has
13 j ur i sdi ct i on over t he Republ i c of Ar gent i na, and t he Republ i c
14 of Ar gent i na i s maki ng t hese payment s. That i s t he cr uci al
15 t hi ng.
16 MR. CLARK: We concur wi t h your Honor a t housand
17 per cent . We don' t di sput e t hat i n any manner . And Eur ocl ear ,
18 f or i nst ance, has j oi ned us. Your Honor di scussed ear l i er t hat
19 Eur ocl ear i s j ust a cl ear i nghouse. Wi t h r egar d t o our bonds,
20 i t oper at es sol el y i n Bel gi um. I t does not hi ng i n t he Uni t ed
21 St at es. I t doesn' t come i nt o t he Uni t ed St at es t o under t ake
22 i t s dut i es. Your Honor ' s or der has t he ef f ect of r equi r i ng i t
23 t o do somet hi ng t hat vi ol at es Bel gi an l aw.
24 Our appl i cat i on woul d ask, your Honor , f or a si mpl e
25 amendment t o t he i nj unct i on t hat says not hi ng i n t he i nj unct i on
( 212) 805- 0300
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1 r equi r es a par t y t o vi ol at e t he l aw of i t s f or umst at e or t he
2 l aw of t he pl ace of per f or mance. We don' t know why t hat woul d
3 be obj ect i onabl e. I t woul d cer t ai nl y hopef ul l y f or est al l
4 somet hi ng - -
5 THE COURT: I know why i t woul d be obj ect i onabl e. I t
6 woul d st ar t maki ng i mpor t ant except i ons t o t he basi c r ul i ng and
7 i nj unct i on whi ch t hi s Cour t has ent er ed. I wi l l not st ar t
8 maki ng t hose except i ons. I s your mot i on br i ef ?
9 MR. CLARK: I t i s, your Honor .
10 THE COURT: I wi l l cer t ai nl y deal wi t h i t i n a r ul i ng.
11 But I ' mgoi ng t o t el l you r i ght now I ' mnot goi ng t o st ar t
12 maki ng except i ons of t he ki nd - - I don' t expect t o be maki ng
13 except i ons of t he ki nd you' r e t al ki ng about . But I wi l l
14 consi der i t and wr i t e a r ul i ng. Thank you ver y much.
15 MR. CLARK: Can I r ai se one ot her i ssue not r el at i ng
16 di r ect l y t o t he except i on i ssue?
17 THE COURT: OK.
18 MR. CLARK: I know t hat t he medi at or i s i n t he
19 cour t r oomt oday I j ust want t o st at e f or t he r ecor d t hat we ar e
20 subst ant i al hol der s of exchange bonds. We st r ongl y suppor t a
21 negot i at ed sol ut i on t o t hi s i ssue. We i n our br i ef t hat your
22 Honor wi l l r evi ew suggest ed one possi bl e way t o t r y t o r esol ve
23 di f f i cul t i es r el at i ng t o t he RUFO cl ause. I don' t t hi nk ei t her
24 par t y t hought i t was necessar i l y a sol ut i on.
25 We woul d cer t ai nl y be wi l l i ng on behal f of our gr oup
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1 t o consi der and accept a f ai r and ef f ect i ve wai ver of t he RUFO
2 cl ause i f t hat woul d hel p negot i at i ons. I want ed t o l et t he
3 Cour t know t hat we have made t hi s appl i cat i on because we t hi nk
4 t her e ar e ser i ous i ssues t hat ar i se under t he i nj unct i on and
5 t hat t he i nj unct i on shoul d be cor r ect ed i n t he manner t hat we
6 have st at ed, but t hat we al so want t o t r y t o be const r uct i ve
7 and r esol ve t hi s mat t er , your Honor .
8 THE COURT: I t hi nk t he speci al mast er had bet t er get
9 your name, addr ess, and phone number .
10 MR. CLARK: I ' mhappy t o pr ovi de i t , your Honor . I t
11 i s on our br i ef as wel l .
12 THE COURT: I t hi nk you undoubt edl y ought t o exchange
13 cont act i nf or mat i on. Thank you ver y much f or your r emar ks.
14 They ar e ver y hel pf ul .
15 MR. SCHAFFER: Your Honor , Er i c Schaf f er f r om
16 ReedSmi t h f or t he Bank of New Yor k Mel l on. We ar e t he l ast
17 mot i on I t hi nk t hat i s l ef t . Let me say we ar e t he good guys
18 her e. We compl i ed wi t h your Honor ' s i nj unct i on. We agr ee we
19 act ed ver y r esponsi bl y. We agr ee wi t h pl ai nt i f f s t hat we
20 t hwar t ed vi ol at i ons.
21 Our i ssue goes t o what do we do wi t h t he money. Under
22 t he exi st i ng i nj unct i ons, we hol d t he money. The pl ai nt i f f s
23 have asked t hat we r et ur n t he money. As set f or t h i n our
24 mot i on, our memor andum, t hat cr eat es a l ot of unnecessar y
25 i ssues f or t he Bank of New Yor k Mel l on.
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2 MR. SCHAFFER: Of cour se.
3 THE COURT: What do you bel i eve shoul d be done wi t h
4 t he money?
5 MR. SCHAFFER: Your Honor , t hi nk consi st ent wi t h t he
6 exi st i ng i nj unct i ons we shoul d be hol di ng t he money pendi ng
7 what ever f ur t her pr oceedi ngs t ake pl ace her e ei t her wi t h t he
8 speci al mast er or - -
9 THE COURT: I agr ee wi t h t hat . Thank you ver y much.
10 MR. SCHAFFER: Thank you, your Honor .
11 MR. FRI EDMAN: Your Honor , may I be hear d br i ef l y wi t h
12 r espect t o t hat ?
13 THE COURT: Sur e.
14 MR. FRI EDMAN: Thank you. Two t hi ngs, your Honor .
15 Fi r st , when t he i ssue was f i r st pr esent ed t o t he Cour t , your
16 Honor expr essed t he vi ew t hat t he at t empt ed payment by t he
17 Republ i c of Ar gent i na t o t he Bank of New Yor k was an i l l egal
18 payment and shoul d be nul l i f i ed. What t he Cour t sai d at t hat
19 t i me was t hat t he f unds shoul d be r et ur ned t o Ar gent i na. We
20 have si nce t hen had di scussi ons wi t h counsel f or t he Bank of
21 New Yor k about an appr opr i at e or der .
22 I woul d l i ke t o st at e ver y br i ef l y why we bel i eve t hat
23 your Honor ' s or i gi nal st at ement t hat t he f unds shoul d be
24 r et ur ned i s bot h - -
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1 MR. FRI EDMAN: Yes.
2 THE COURT: Look, of al l t he i ssues we have, and t her e
3 ar e a l ot of i ssues, i t seems t o me t hi s sur el y shoul d be abl e
4 t o be agr eed on. The r epubl i c at t empt ed t o pay i nt er est . That
5 at t empt was i mpr oper . We t al ked about t hat many, many t i mes.
6 But money act ual l y had been pai d. The bank was ver y
7 r esponsi bl e and cer t ai nl y pai d at t ent i on t o my exi st i ng or der
8 and compl i ed wi t h i t as wel l as i t coul d. I t di dn' t r ef use t he
9 r ecei pt of t he money, but i t di d not car r y i t on. Ver y
10 r esponsi bl e.
11 What shoul d be done now wi t h t hat money? Can' t t he
12 par t i es agr ee? I t ' s money. Whet her i t shoul d go back t o t he
13 r epubl i c or not , can' t you agr ee on t hat ?
14 MR. FRI EDMAN: We, your Honor , have had di scussi ons,
15 and I ' mcer t ai nl y wi l l i ng t o pur sue t hose di scussi ons. What I
16 woul d say t o t he Cour t i s t her e r eal l y ar e t wo maj or concer ns
17 wi t h r espect t o t he Bank of New Yor k r et ai ni ng t he money.
18 One i s t hat wi t h t he f unds at t he Bank of New Yor k,
19 t he r epubl i c has been pr ocl ai mi ng i t s cont i nued def i ance of
20 your Honor ' s or der and asser t i ng t hat i t has pai d and wi l l
21 cont i nue t o pay t he exchanger s. The r epubl i c poi nt s t o t he
22 539 mi l l i on pai d t o t he Bank of New Yor k.
23 Second, t he t er mI woul d use wi t h r espect t o t he f unds
24 hel d at Bank of New Yor k woul d be " at t r act i ve nui sance" i n t he
25 sense t hat we ar e al r eady seei ng r umbl i ngs of l i t i gat i on i n
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1 cour t s ot her t han t he Uni t ed St at es. Your Honor hear d a l i t t l e
2 bi t about t hat f r omcounsel f or t he exchange bondhol der s who
3 hol d eur o bonds. We ar e concer ned t hat wi t h t he f unds at Bank
4 of New Yor k, we wi l l be i n and out of t hi s Cour t and ot her
5 cour t s.
6 THE COURT: Let me i nt er r upt you. I don' t r eal l y know
7 t he ef f ect s of banki ng l aw, and so f or t h. The r eason t he f unds
8 ar e i n t he hands of t he Bank of New Yor k was r eal l y an i l l egal
9 move on t he par t of t he Republ i c of Ar gent i na. I t was i l l egal .
10 Now, i s i t possi bl e t o cl ear t he decks and t o el i mi nat e t he
11 ef f ect s of t hat i l l egal i t y? I s i t possi bl e t o r et ur n t he money
12 t o t he r epubl i c?
13 MR. FRI EDMAN: I woul d say yes, your Honor . What I
14 wi l l di scuss wi t h counsel f or t he Bank of New Yor k i s whet her
15 we can agr ee on a si mpl e f or mof or der t hat woul d say t hat t he
16 Bank of New Yor k wi l l r et ur n t he f unds and t hat t he r epubl i c
17 shal l not obst r uct or pr event but shal l pr ovi de necessar y
18 i nf or mat i on and ot her wi se cooper at e, because t he r epubl i c i s of
19 cour se subj ect t o your Honor ' s j ur i sdi ct i on. We woul d
20 under st and t hat i f t he r epubl i c - -
21 THE COURT: Can I i nt er r upt you agai n. I want t o
22 concl ude t hi s and get t o somet hi ng el se. I woul d say t o you
23 t hat I woul d be cer t ai nl y wi l l i ng t o si gn an appr opr i at e or der
24 havi ng t hat money r et ur ned. I t shoul d be r et ur ned. Maybe
25 t her e wi l l be obj ect i ons t o t he or der . Obvi ousl y, I don' t
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1 car e. I t hi nk t he money shoul d be r et ur ned. Can we l eave i t
2 at t hat ?
3 MR. FRI EDMAN: Yes. I wi l l t r y t o negot i at e wi t h
4 counsel f or Bank of New Yor k on a f or mof or der . I f t her e ar e
5 any di sagr eement s, we wi l l come back t o your Honor .
6 THE COURT: Ver y good.
7 MR. FRI EDMAN: Thank you.
8 MR. SCHAFFER: Your Honor , Er i c Schaf f er f or Bank of
9 New Yor k Mel l on. Your Honor , I won' t r epeat ever yt hi ng t hat i s
10 i n our memor andum, but r et ur n exposes t he t r ust ee needl essl y t o
11 a l ot mor e l i t i gat i on i n a l ot of count r i es. We have compl i ed
12 wi t h t hi s Cour t ' s or der . Ther e ar e pr act i cal pr obl ems. Ther e
13 ar e due pr ocess pr obl ems.
14 THE COURT: Can you t el l me what shoul d be done.
15 MR. SCHAFFER: Your Honor , I bel i eve t he answer i s we
16 hol d t he money r i ght wher e i t i s, t hat we do exact l y what your
17 exi st i ng i nj unct i ons r equi r e.
18 THE COURT: I ' mcompl et el y si l ent because I have
19 not hi ng t o say. Tr y t o wor k somet hi ng out t hat you can agr ee
20 on, t he t hi ng t hat wi l l cr eat e t he l east pr obl ems, t he l east
21 pot ent i al l i t i gat i on we want t o do. Unf or t unat el y, we ar e i n
22 t he soup. I can' t hel p t hat . Thank you ver y much, ever ybody.
23 MR. CLARK: Your Honor , can I make one r equest ?
24 Bef or e any or der i s submi t t ed t o your Honor t o be si gned, t hat
25 i t be docket ed so t hat t he ot her par t i es who mi ght be
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1 i nt er est ed can vi ew i t ?
2 THE COURT: Absol ut el y.
3 MR. CLARK: Thank you, your Honor .
4 THE COURT: I want t o t ur n now t o somet hi ng t hat i s
5 r eal l y of t he gr eat est possi bl e i mpor t ance, and t hat i s t hat i f
6 sensi bl e st eps ar e not t aken, t her e coul d wel l be a def aul t by
7 t he r epubl i c as of t he end of J ul y. I t hi nk because of a gr ace
8 per i od t her e was no def aul t as of t he end of J une, but t her e
9 coul d be a def aul t as of t he end of J ul y. A def aul t meani ng
10 t hat i nt er est payment s woul d not be made t o t he exchanger s and
11 an appr opr i at e payment woul d not be made under t he par i passu
12 cl ause.
13 I have appoi nt ed a speci al mast er , Dani el Pol l ack, t o
14 wor k wi t h t he par t i es t o t he l i t i gat i on about an at t empt t o
15 set t l e. Mr . Pol l ack i s her e. Coul d Mr . Pol l ack st and up.
16 Thank you.
17 I want t o do a l i t t l e hi st or y. Af t er t he def aul t i n
18 ar ound 2001 or whenever i t was, i n accor dance wi t h t he
19 cont r act ual pr ovi si ons i n t he bonds, many l awsui t s wer e f i l ed
20 i n t hi s cour t agai nst t he r epubl i c based on t he def aul t s. I
21 don' t know how many, but j udgment s wer e obt ai ned. Ther e r eal l y
22 wasn' t any opposi t i on gener al l y t o pr oceedi ngs t o obt ai n
23 j udgment s, and j udgment s wer e obt ai ned by var i ous par t i es
24 agai nst t he r epubl i c i n var i ous amount s. J udgment s.
25 I n 2005 and 2010 t he r epubl i c made of f er s t o exchange
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1 t he exi st i ng bonds f or new bonds wi t h a l ower i nt er est r at es,
2 and so f or t h. I t i s my i nf or mat i on t hat maybe 90 per cent or so
3 of t he bondhol der s accept ed t hose exchange of f er s, but not
4 ever ybody di d. Ther e wer e peopl e who had t hei r j udgment s, and
5 t hey wer e not wi l l i ng t o gi ve up t hose j udgment s i n exchange
6 f or a new of f er . They wer e exer ci si ng t hei r r i ght s under t he
7 l aw and under t he cont r act ual pr ovi si ons whi ch t he r epubl i c
8 or i gi nal l y of f er ed i n t he bond cont r act s. Over 10 or 11 year s
9 t he peopl e who had t hese val i d j udgment s sought t o r ecover on
10 t hose j udgment s. Wi t h possi bl y one smal l except i on, t hose
11 ef f or t s wer e unsuccessf ul .
12 The r epubl i c does not have a subst ant i al st or e of
13 asset s of any ki nd i n t he Uni t ed St at es whi ch can be r ecover ed
14 upon. What t he peopl e who had t he j udgment s di d was t o f i nd
15 somet hi ng t hat t hey t hought mi ght be an asset and t hat t hey
16 mi ght be abl e t o r ecover on, but , wi t h one possi bl e except i on,
17 t hose at t empt s wer e t ur ned down by me. I t hi nk t o t he ext ent
18 t hey went up t o t he Cour t of Appeal s, basi cal l y t hey wer e
19 t ur ned down i n t he Cour t of Appeal s.
20 We went f or about 10 year s, 11 year s, what ever i t was,
21 wi t h t he r epubl i c r ef usi ng t o pay t he j udgment s, and of cour se
22 t hey di dn' t suppl y anyt hi ng agai nst whi ch t he j udgment s coul d
23 be r ecover ed. The r het or i c t hat was devel oped i n t he r epubl i c
24 dur i ng t hi s t i me was unf or t unat e, al t hough not as i ncendi ar y as
25 r ecent r het or i c.
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1 The r epubl i c t ook ever y st ep i t coul d t o i ndi cat e i t
2 woul d not pay t he j udgment s, i t woul d not negot i at e t he
3 j udgment s. I t hi nk l aws wer e passed i n t he Congr ess, and so
4 f or t h. The j udgment s wer e t r eat ed as t hi ngs t hat t he r epubl i c
5 shoul d have not hi ng t o do wi t h. Thi s was unf or t unat e.
6 J udgment s ar e j udgment s. The peopl e who obt ai ned t he
7 j udgment s obt ai ned t hose j udgment s because of t he cont r act ual
8 pr ovi si ons gr ant ed by t he r epubl i c. But f or 11 year s or so t he
9 r epubl i c not onl y di d not pay t he j udgment s but i n ever y way
10 i ndi cat ed i t s unwi l l i ngness t o r ecogni ze t hose j udgment s.
11 Thi s changed. I can' t r emember whet her i t was 2010 or
12 2011, but t her eabout s, t he at t or neys f or t he pl ai nt i f f s
13 r equest ed t he Cour t t o r ecogni ze a pr ovi si on whi ch had been i n
14 t he cont r act ual document s al l al ong but had not been r el i ed on,
15 and t hat i s t he par i passu pr ovi si ons, essent i al l y meani ng i f
16 t he r epubl i c pai d cer t ai n ki nds of debt s, t her e had t o be a
17 r ecogni t i on - - and I ' mnot t r yi ng t o get i nt o t he ar i t hmet i c - -
18 t her e had t o be a r ecogni t i on of t he r i ght s of peopl e wi t h
19 j udgment s under t he par i passu cl auses, what ever t hey wer e.
20 Thi s changed t he si t uat i on, meani ng i t was necessar y
21 f or t he r epubl i c t o deal wi t h t he j udgment s. Speaki ng i n a
22 gener al , r at her l oose way, af t er t he i nvocat i on of t he par i
23 passu cl auses, i t was now cl ear t hat t he r epubl i c coul d not pay
24 t he exchanger s wi t hout a r ecogni t i on, and I won' t get i nt o t he
25 f or mul a, r ecogni t i on of t he peopl e wi t h t he j udgment s who wer e
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1 i nvoki ng t he par i passu cl ause.
2 That means, and I ' mr epeat i ng mysel f , t hat t her e had
3 t o be a deal i ng wi t h and a r ecogni t i on of t he j udgment s. The
4 desi r abi l i t y of a set t l ement i s al ways cl ear t o a j udge. I t
5 became cl ear t o me t hat i t was ver y, ver y i mpor t ant t o t r y t o
6 ar r i ve at a set t l ement , a set t l ement whi ch woul d at l ong l ast
7 t ake i nt o account t he exchanger s, t ake i nt o account t he peopl e
8 who had t he j udgment s, t ake i nt o account al l of t he obl i gat i ons
9 of t he r epubl i c. I emphasi ze obl i gat i ons.
10 The obl i gat i ons under t he j udgment s di dn' t ar i se
11 yest er day. They ar ose 10 year s ago, 11 year s ago, whenever .
12 But t he r epubl i c sought t o hol d t hemasi de, so t o speak. That
13 coul d not any l onger be done, because of t he i nvocat i on of t he
14 par i passu cl ause, whi ch I hel d coul d be done, and t he Cour t of
15 Appeal s af f i r med me.
16 I n many cases a set t l ement i s a ni ce t hi ng, but one of
17 many opt i ons. What we have her e f aci ng t he r epubl i c and ot her s
18 i s somet hi ng much mor e cr uci al . I f pr oper ar r angement s ar e not
19 made, t her e coul d be a def aul t by t he r epubl i c on or about J ul y
20 30. That woul d be most unf or t unat e, unf or t unat e f or t he peopl e
21 who wer e expect i ng i nt er est payment s, et c. , and cer t ai nl y
22 unf or t unat e f or t he r epubl i c i t sel f .
23 To t r y t o see i f a set t l ement of i ssues coul d be
24 achi eved, t he Cour t appoi nt ed t he gent l eman I i nt r oduced t o you
25 a f ew moment s ago, Dani el Pol l ack, as speci al mast er . He i s a
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1 speci al mast er t o assi st i n set t l ement negot i at i ons.
2 The r eason I ' ve gone i nt o t hi s hi st or y i s t o i ndi cat e
3 t hat we have had year s of backgr ound, but now we ar e at a ver y
4 ei t her t he cr uci al t i me or a cr uci al t i me. We have ar r i ved
5 t her e. I f i t i s possi bl e, i t woul d be good t o have t he
6 r het or i c consi st i ng of f ul l - page newspaper ads l et up. I f
7 t her e i s a def aul t , i t wi l l be pr et t y st al e i n peopl e' s mout hs.
8 They may have t al ked about vul t ur es, and so f or t h. what we ar e
9 t al ki ng about i s r eal l i ve i ssues, r eal l i ve l i t i gat i on, r eal
10 l i ve dol l ar s and cent s.
11 I know t her e ar e har d f eel i ngs. I know t her e ar e har d
12 f eel i ngs by t he r epubl i c about t he peopl e who have t he
13 j udgment s and woul dn' t set t l e, woul dn' t exchange. But i f t he
14 r epubl i c coul d r ecogni ze t hat t he peopl e who have t he j udgment s
15 si mpl y have what t hey have a r i ght t o have under t he ver y
16 cont r act s t hat t he r epubl i c put f or war d, and i f t he r epubl i c
17 and ever ybody el se woul d r ecogni ze t hat t her e ar e obl i gat i ons
18 her e, t her e ar e obl i gat i ons, and t hose obl i gat i ons of cour se
19 need t o be deal t wi t h.
20 I ' mt aki ng a st ep t o i mpl ement t he or der t hat I
21 ent er ed i n appoi nt i ng t he speci al mast er . I ' mdoi ng t hi s
22 because t i me i s shor t . Ther e i s not a l ong t i me bef or e t he end
23 of J ul y. I f t he end of J ul y comes and t her e i s a def aul t , t hat
24 wi l l be ver y, ver y sad and unf or t unat e. We want t o do
25 ever yt hi ng we can t o avoi d t hat . And t hat means set t l ement .
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1 I amaddi ng t o t he pr ovi si ons t hat I put down i n my
2 appoi nt ment of t he speci al mast er t hi s di r ect i on. I am
3 di r ect i ng, and pl ease t ake not e of t hi s, t hat t he par t i es and
4 t hei r l awyer s i n t hi s case meet wi t h t he Speci al Mast er Dani el
5 Pol l ack pr ompt l y, at a t i me t o be set by Mr . Pol l ack, and t o
6 meet wi t h hi mcont i nuousl y unt i l a sol ut i on i s r eached.
7 I f t her e can be no sol ut i on, I want t o hear about i t
8 i n open cour t . I t hi nk t her e can be a sol ut i on. I t hi nk t her e
9 can be a negot i at ed si t uat i on her e. I r epeat , I ' mdi r ect i ng
10 t hat t he par t i es and t hei r l awyer s i n t hi s case meet wi t h Mr .
11 Pol l ack pr ompt l y, at a t i me t o be set by hi m, and t o meet wi t h
12 hi mcont i nuousl y i n t he gr eat est at t empt t o r each a negot i at ed
13 sol ut i on.
14 Wi t h t hat , pl ease.
15 MR. BLACKMAN: Your Honor , J onat han Bl ackman
16 r epr esent i ng t he Republ i c of Ar gent i na. I know i t has been a
17 l ong mor ni ng, and we appr eci at e ever yt hi ng t he Cour t has sai d
18 and appr eci at e t he decade and mor e t hat we have spent bef or e
19 you.
20 The f i r st t i me I ever st ood at t hi s podi um, whi ch was
21 i n 2002, a shocki ng t hought , I t ol d t he Cour t t hat sover ei gn
22 debt r est r uct ur i ng i s necessar i l y vol unt ar y. I sai d t hat t he
23 r epubl i c' s wi sh t hen was t o t r y t o r each a negot i at ed
24 r esol ut i on wi t h al l of i t s cr edi t or s. That was t he onl y way a
25 r esol ut i on coul d be r eached.
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1 Ther e i s no cr am- down, t her e i s no bankr upt cy f or
2 st at es. I f t her e wer e, we woul dn' t be her e, because t he 92
3 per cent of or i gi nal l y def aul t ed debt t hat was r esol ved t hr ough
4 t he exchange of f er s i s f ar mor e t han t hi s count r y or any
5 count r y woul d r equi r e t o bi nd t he hol dout s. We don' t have t hat
6 r egi me.
7 I sai d at t hi s podi umagai n i n 2002 t hat we r ecogni ze
8 t he r i ght s of cr edi t or s who do not wi sh t o vol unt ar i l y set t l e
9 or exchange t o asser t t hei r l egal r i ght s. We di d have a qui t e
10 pr of ound di sagr eement wi t h t he Cour t as t o what t hose l egal
11 r i ght s wer e or wer e not wi t h r espect t o t he par i passu cl ause.
12 But we ar e past t hat .
13 We ar e i n a si t uat i on now wher e, as a r esul t of t he
14 Cour t ' s or der s, t he r epubl i c does f ace a ver y i mmi nent r i sk of
15 def aul t at t he end of t hi s mont h. Those or der s, I woul d have
16 t o r emi nd t he Cour t , ar e ver y bl unt i nst r ument s.
17 I know t he Cour t ' s obj ect i ve was t o r equi r e t he
18 r epubl i c or encour age t he r epubl i c t o engage wi t h t he hol dout
19 cr edi t or s. But t he f act i s t hat under t hose or der s, t hose
20 hol dout cr edi t or s have a l egal r i ght , as t he Cour t i nt er pr et ed
21 t hat cl ause, t o be pai d 100 cent s on t he dol l ar of al l of t hei r
22 pr i nci pal and al l of t hei r i nt er est f or any si ngl e i nt er est
23 payment t o t he made t o t he 92 per cent .
24 We want t o negot i at e a set t l ement wi t h ever yone, but
25 t o do t hat r equi r es movement . We can' t have a si t uat i on wher e
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1 hol dout cr edi t or s ar e i nsi st i ng on t hei r j udgment or t hei r
2 cl ai m. That i s poi nt one.
3 Poi nt t wo, t her e ar e ver y, ver y si gni f i cant
4 const r ai nt s on t he abi l i t y t o r each a r esol ut i on bet ween now
5 and t he end of t he mont h. We have set t hose f or t h i n our
6 paper s. Fi r st , t her e i s t he so cal l RUFO cl ause, t he r i ght of
7 f i r st r ef usal . Unt i l t he end of t hi s year t he exchange
8 bondhol der s, t he 92 per cent , who, as t he Cour t r ecogni zed, al so
9 have l egal r i ght and t o whomt he r epubl i c has obl i gat i ons, have
10 a r i ght t hat i n essence i s t o get what ever i mpr oved t r eat ment
11 t he hol dout s get i n any f ur t her vol unt ar y exchange.
12 As I t hi nk t he Cour t r ecogni zes - -
13 THE COURT: Say t hat l ast agai n.
14 MR. BLACKMAN: The RUFO cl ause i n essence says t hat i f
15 t he r epubl i c at any t i me bef or e December 31, 2014, of f er s a
16 bet t er deal - - I ' mbei ng col l oqui al - - of f er s a bet t er deal t o
17 t he hol dout s, t he exchange bondhol der s have a r i ght t o t hat
18 deal as wel l . Thi s was put i n t her e del i ber at el y t o pr event
19 t he r epubl i c f r ommaki ng a deal wi t h 92 per cent and t hen
20 t ur ni ng ar ound t he next day and maki ng a bet t er deal wi t h ot her
21 peopl e. I t ' s t ot al l y under st andabl e.
22 The Cour t has t al ked about al l t he j udgment hol der s.
23 Beyond al l t he j udgment hol der s, t her e ar e peopl e who don' t yet
24 have j udgment s but who al so have par i passu r i ght s under t he
25 Cour t ' s i nt er pr et at i on. What t hi s means i s we have t o make a
( 212) 805- 0300
52
E7mr nml m
1 gl obal of f er t o ever ybody. But we al so ar e const r ai ned by t he
2 RUFO t hat we can' t do t hat bef or e t he end of t he year wi t hout
3 t r i gger i ng t hat cl ause f or t he benef i t of t he exchange
4 bondhol der s.
5 That i s t he f i r st huge const r ai nt . That was one of
6 t he f eat ur es of our st ay appl i cat i ons. I t wi l l be hugel y
7 compl ex t o r esol ve t hi s i n any event . The RUFO adds a whol e
8 addi t i onal l ayer of compl exi t y. That at l east sunset s, i t ' s
9 gone af t er December 31. But unt i l t hen, t hat i s a huge i ssue.
10 The second i ssue i s Ar gent i na i s a st at e. The Cour t ' s
11 or der cont empl at es t hi ngs t hat I r emember , I ' msur e t he Cour t
12 does, f r omear l i er days when l abor / management negot i at i ons
13 woul d go on ar ound t he cl ock, and so on, and t her e woul d be a
14 f eder al medi at or . I have vi si ons of r eadi ng t he newspaper s
15 f r omt he ' 50s and ' 60s.
16 St at es don' t oper at e l i ke t hat . Wi t h al l r espect ,
17 your Honor , a mi ni st er cannot be expect ed t o si t i n New Yor k i n
18 Mr . Pol l ack' s of f i ce cont i nuousl y. He has t o hear . He has t o
19 r epor t . He has t o consul t at t he l i t er al l y hi ghest l evel of
20 t he st at e, i t s pr esi dent . These ar e not onl y economi c
21 deci si ons, t hey ar e pol i t i cal deci si ons, t hey ar e pol i cy
22 deci si ons.
23 Ver y i mpor t ant l y, and t hi s i s t he next const r ai nt ,
24 t hey ar e const i t ut i onal and l egal deci si ons. Ar gent i na can' t
25 j ust si gn a cont r act . I t has l aws t hat need t o be addr essed.
( 212) 805- 0300
53
E7mr nml m
1 I t has const i t ut i onal obl i gat i ons i ncumbent on i t s of f i ci al s,
2 i ncl udi ng, as Ms. Wagner ment i oned wi t h r espect t o her cl i ent
3 Ci t i , cr i mi nal penal t i es and t he l i ke. Ar gent i ne of f i ci al s ar e
4 subj ect t o and have been pr osecut ed i n t he past f or doi ng
5 t hi ngs wi t h r espect t o debt r est r uct ur i ng t hat wer e not f ul l y
6 aut hor i zed by Ar gent i ne l aw. That i s a separ at e set of
7 const r ai nt s, l egal / const i t ut i onal const r ai nt s.
8 Fi nal l y, as i n any set t l ement , but I wi l l emphasi ze
9 t hem, t her e ar e f i nanci al const r ai nt s. Ar gent i na coul d not ,
10 and we have t ol d t he Cour t t hi s, pay t he hol dout cr edi t or s i n
11 f ul l , as t he par i passu cl ause as i nt er pr et ed by t he Cour t
12 woul d r equi r e, or anyt hi ng l i ke t hat . Ther e ar e goi ng t o have
13 t o be det ai l ed and, I suspect , pai nf ul negot i at i ons wi t h a
14 uni ver se of peopl e, not j ust t hese pl ai nt i f f s, not even t he $10
15 bi l l i on of j udgment hol der s i n t hi s cour t , but t he ent i r e
16 uni ver se of hol dout s whose cl ai ms we est i mat e t o be i n excess
17 of $20 bi l l i on, t o make a deal whi ch has t o t r eat ever yone t he
18 same.
19 What I woul d t her ef or e ask your Honor ar e t wo t hi ngs.
20 One, I woul d be r emi ss i n my dut y as a l awyer f or my cl i ent i f
21 I di d not r epeat our r equest f or a st ay at l east t o get us
22 t hr ough t hi s payment and t hr ough t he end of t he year so we
23 don' t have t he RUFO t o deal wi t h anymor e.
24 Number t wo, t o modi f y your or der . Havi ng r ound- t he-
25 cl ock negot i at i ons bet ween now and t he end of t he year i s
( 212) 805- 0300
54
E7mr nml m
1 unl i kel y, i n f act I woul d say i mpossi bl e, f or al l t he r easons
2 t hat I gave you, t o r esul t i n a set t l ement . The RUFO al one, i f
3 i t ' s not al l owed t o di e an act ual deat h at t he end of t he year ,
4 wi l l r equi r e mont hs t o get t he wai ver s t hat counsel f or one of
5 t he ot her par t i es ment i oned ear l i er . I t si mpl y can' t be done
6 by t he end of t hi s mont h.
7 I woul d r espect f ul l y suggest t hat r at her t han r ound-
8 t he- cl ock negot i at i ons, we do t hi nk i t i s a good i dea - - we
9 have had meet i ngs. Ther e shoul d be mor e of t hem. We shoul d be
10 exchangi ng i deas. But r at her t han cr eat e t he ki nd of
11 ar t i f i ci al pr essur e cooker t hat i n t hi s si t uat i on i f a st ay i s
12 not goi ng t o wor k, t hat we pr oceed down t he r oad t hat we ar e
13 pr oceedi ng. But we woul d t hi nk a st ay woul d r eal l y expedi t e
14 t hat and f aci l i t at e i t .
15 MR. COHEN: Your Honor , may I r espond?
16 THE COURT: No.
17 Thank you. I ' mgl ad you spoke, Mr . Bl ackman. The
18 pr obl emwi t h t he so- cal l ed st ay appl i cat i on was t hat i t woul d
19 t ake away t he r i ght s. I t woul d t ake away r i ght s. I t r eal l y
20 woul dn' t be a st ay i n t he sense of hol di ng t he st at us quo. I n
21 my vi ew, t he st ay appl i cat i on, pr o or con, i s not somet hi ng
22 t hat i s necessar y t o a negot i at i on of set t l ement .
23 You have ar t i cul at ed ver y wel l maybe not al l but most
24 of t he pr obl ems. The r eason f or havi ng set t l ement negot i at i ons
25 i s t o t r y t o deal wi t h t hose pr obl ems. That ' s what set t l ement
( 212) 805- 0300
55
E7mr nml m
1 negot i at i ons ar e about . Most i mpor t ant l y, t o avoi d a def aul t
2 at t he end of J ul y.
3 I n my vi ew, ever y si ngl e pr obl emyou ar e t al ki ng about
4 i s suscept i bl e of bei ng handl ed i n some way i n a set t l ement .
5 I t i s not goi ng t o be a set t l ement wr i t t en i n one par agr aph.
6 I t wi l l deal , have t o deal , wi t h compl ex pr obl ems, wi t h
7 conf l i ct s. I t wi l l have t o deal wi t h al l t hat . But i f we
8 don' t , t her e wi l l be a def aul t on J ul y 30t h, and t hat i s t he
9 wor st t hi ng. That i s about t he wor st t hi ng t hat , si t t i ng her e,
10 I can envi si on. I don' t want t hat t o happen. Peopl e wi l l be
11 hur t by t hat , r eal hur t . Not vul t ur es bei ng hur t , but r eal
12 peopl e wi l l be hur t .
13 Whet her t he negot i at i ons ar e r ound- t he- cl ock or
14 somet hi ng, we have a speci al mast er . I have not r eal l y t r i ed
15 t o t el l hi mhow t o conduct t he negot i at i ons. That ' s up t o hi m.
16 But what I want t o i ndi cat e, and mor e t han i ndi cat e, I am
17 di r ect i ng t hat t he par t i es and t he l awyer s meet pr ompt l y and
18 cont i nuousl y. I don' t mean anyt hi ng absur d. I don' t mean t hat
19 t he f i nance mi ni st er of t he Republ i c of Ar gent i na has t o
20 per sonal l y be i n New Yor k r ound t he cl ock. Of cour se. But he
21 undoubt edl y has st af f .
22 I f t he par t i es her e r ecogni ze t he absol ut e necessi t y
23 of t r yi ng t o r each a set t l ement by t he end of t he mont h - - and
24 t hat set t l ement won' t t ake car e of al l i ssues t hat mi ght ar i se
25 i n t he next year . I t may. But t her e ar e ways t o somehow avoi d
( 212) 805- 0300
56
E7mr nml m
1 a def aul t . That i s what i s bei ng at t empt ed.
2 I expect t he par t i es and t he l awyer s t o wor k r eal l y
3 cont i nuousl y. Ther e i sn' t a l ot of t i me. Thi s i sn' t t wo year s
4 ago. I t ' s t oday. The best t hi ng we can do i s t o adj our n t hi s
5 cour t sessi on, whi ch has been ver y hel pf ul . Ever ybody who has
6 spoken has been hel pf ul .
7 Mr . Pol l ack i s up her e i n f r ont . I wi l l ask you now
8 what you woul d suggest as f ar as t he mechani cs at t he moment .
9 Coul d you pl ease addr ess t hat and speak t o t he gr oup, Mr .
10 Pol l ack.
11 MR. POLLACK: Thank you, your Honor . I woul d suggest
12 t hat we meet pr ompt l y at 10 a. m. and t hat r epr esent at i ves of
13 t he par t i es and t he l awyer s bot h be pr esent .
14 THE COURT: 10 a. m. t omor r ow at your of f i ce?
15 MR. POLLACK: Cor r ect .
16 THE COURT: We ar e adj our ned. Thank you.
17 ( Adj our ned)
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( 212) 805- 0300

EXHIBIT B

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EXHIBIT C


Christopher J. Clark
Direct Dial: (212) 906-1350
Christopher.clark2@lw.com

NY\6459174.2

1
53rd at Third
885 Third Avenue
New York, New York 10022-4834
Tel: +1.212.906.1200 Fax: +1.212.751.4864
www.lw.com
FIRM / AFFILIATE OFFICES
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Hong Kong Shanghai
Houston Silicon Valley
London Singapore
Los Angeles Tokyo
Madrid Washington, D.C.

J uly 26, 2014

VIA EMAIL
SETTLEMENT COMMUNICATION
PURSUANT TO FRE 408

Special Master Daniel Pollack
McCarter & English LLP
245 Park Avenue, 27
th
Floor
New York, New York 10167

Jonathan Blackman
Carmine Boccuzzi
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006

Re: NML Capital, Ltd. v. Republic of Argentina, 08 Civ. 6978 (TPG) and related cases
Dear Messrs. Pollack, Blackman and Boccuzzi:

This firm represents the Euro Bondholders
1
in connection with the above-referenced
action. As you are aware, the Euro Bondholders are eager to see a negotiated resolution to this
matter. Based on press reports, we understand that the Republic of Argentina believes that the
Right Upon Future Offers (RUFO) clause is an impediment to settlement. The Euro
Bondholders believe that there are solutions to any RUFO concerns and desire to work with the
parties to implement ways to remove the RUFO clause as an obstacle to a resolution.

1
The Euro Bondholders are Knighthead Capital Management, LLC, Redwood Capital
Management, LLC, Perry Capital LLC, VR Global Partners, LP, Monarch Master Funding 2
(Luxembourg) S. r.l., Centerbridge Partners, L.P., QVT Fund IV LP, QVT Fund V LP, and
Quintessence Fund LP (each on behalf of itself or one or more investment funds or accounts
managed or advised by it).
Jul y 26, 2014
Page 2

As you are further aware, the Euro Bondholders already have stated that they would be
willing to waive the RUFO clause in a permanent and conclusive manner as part of a settlement
among all parties allowing for the prompt and permanent resumption of payments on the
exchange bonds.
2
We have been in touch with other interested investors who also would be
willing to waive the RUFO clause in the manner described above. In briefs filed with the Court,
we suggested that the Republic should undertake a consent solicitation seeking a waiver of the
RUFO clause. Between the Euro Bondholders and other aligned investors with whom we have
been in contact in only the last 24 hours, there is a group holding approximately 5.2 billion
(notional value) in euro-denominated exchange securities willing to waive the RUFO clause to
bring about a resolution of this matter. These securities are held in the approximate amounts per
series as set forth below.

ISIN Amount
XS0501195134 1,177,000,000
XS0205545840 1,330,000,000
XS0205537581 1,251,000,000
XS0501195993 65,500,000
XS0209139244 1,356,000,000

It is our understanding that numerous additional bondholders may wish to express their support
for a waiver of the RUFO clause, and we will supplement the amount of the groups holdings as
needed. In addition, the group holding the euro-denominated securities detailed above also has
meaningful holdings of US dollar denominated securities and would be amenable to an identical
RUFO waiver concerning those securities.

Although we suggested that the Republic undertake a consent solicitation, we are open to
alternate means to resolve any issues related to the RUFO clause. Based on our informal efforts
so far, we have identified a substantial number of bondholders who would be willing to waive
the RUFO clause. In order for that to happen, however, the Republic must not be in default and
must be given a reasonable period to conduct a consent solicitation complying with the securities
laws of the U.S., U.K., J apan, and Argentina.

2
Nothing herein in intended to waive any of the Euro Bondholders rights under the Indenture
governing the exchange bonds or applicable law, including the Euro Bondholders argument that
the euro-denominated exchange bonds should not be subject to the Courts injunctions.
Jul y 26, 2014
Page 3

Please let me know if you would like to discuss these issues further.

Respectfully,

/s/ Christopher J . Clark

Christopher J . Clark
of LATHAM & WATKINS LLP

cc: Robert Cohen
Edward Friedman
Matthew McGill
Michael Spencer
Robert Carroll


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