Case 1:18-cv-00548 Document 1 Filed 01/22/18 Page 1 of 14

Jonathan S. Sack, Esq. (JSS 1835)

Sack & Sack, LLP
Attorneys for Plaintiff
70 East 55th Street, 10th Floor
New York, New York 10022
Tel.: (212) 702-9000
Fax: (212) 702-9702
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
DRAW CAPITAL PARTNERS, LLC, on behalf of : Case No. 18-CV-_________
itself and all others similarly situated, :
:
Plaintiff, : COMPLAINT
:
— against — :
:
THE REPUBLIC OF ARGENTINA, :
:
Defendants. :
:
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Plaintiff, DRAW Capital Partners, LLC (“DRAW Capital” or “Plaintiff”), on behalf of

itself and all others similarly situated, by its undersigned counsel, for its Complaint against

Defendant the Republic of Argentina (the “Republic”), hereby alleges the following:

NATURE OF THE ACTION

1. This is a breach of contract action arising from the Republic’s willful failure to

make contractually-mandated interest payments on certain bonds issued by the Republic that are

currently (and beneficially) owned and held by Plaintiff.

2. The bonds in question were originally issued pursuant to exchange offers by the

Republic in 2005 and 2010 (the “Exchange Bonds”), when the Republic restructured certain

public external debt on which it had defaulted in 2001.

3. The Exchange Bonds (which are described in detail herein) are governed by a

Trust Indenture (the “Indenture”) between the Republic and the Bank of New York Mellon
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(“BNY Mellon”), as trustee. A true and correct copy of the Indenture is attached hereto as

Exhibit “A”.

4. Plaintiff seeks to recover interest that accrued on periodic interest payments due

on the Exchange Bonds that the Republic failed to remit and missed in 2014 and 2015, thus

defaulting on the bonds (the “Defaulted Bonds”).

5. The Republic has failed to make such “interest-on-interest” payments, which are

expressly and contractually mandated under the Indenture as an obligation of the Republic.

6. The Republic’s decision to not make such “interest-on-interest” payments was

one that was made with malice and reckless disregard to the ownership rights and entitlements of

the Plaintiff with respect to the Exchange Bonds.

7. As a result of the Republic’s willful failure to pay interest on the Exchange Bonds

while it resolved the holdout disputes, the Republic converted the rights of the Exchange Holders

to receive “interest on interest” payment and - Exchange Holders (who had all accepted the

Republic’s requests to restructure in 2005 and 2010 and who were instrumental in getting the

holdout dispute resolved) were deprived of contractually mandated interest payments of in

excess of $3.5 Billion - were thus denied the opportunity to earn a return (i.e., interest on

interest) on that money, which, to date, has resulted in at least Three Hundred Million

($300,000,000) Dollars in damages.

THE PARTIES

8. Plaintiff DRAW Capital is a Delaware limited liability company having its

registered office at 16192 Coastal Highway, Lewes Delaware 19958.

9. Plaintiff holds claims to interest that accrued on interest payments on the

Defaulted Bonds. True and correct copes of the Global Securities (as defined in Section 1.1 of

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the Indenture) governing those series are attached hereto as Exhibits “B”.

10. Defendant the Republic of Argentina is a Foreign State as defined in 28 U.S.C.

§ 1603.

JURISDICTION AND VENUE

11. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1330 because

the Republic is a Foreign State that has, pursuant to Sections 12.8 and 12.10 of the Indenture,

explicitly and unconditionally waived sovereign immunity with respect to actions arising out of

the Indenture and is, therefore, not entitled to immunity under 28 U.S.C. §§ 1605-07 or under

any applicable international agreement.

12. The Indenture contemplates that the Indenture and the bonds issued thereunder

would be governed by either New York law or English law. Section 12.7 of the Indenture

provides that, with respect to series governed by New York law, the Indenture and such bonds

“shall be governed by and construed in accordance with the laws of the State of New York

without regard to principles of conflicts of laws,” and with respect to series governed by English

law, the Indenture and such bonds “shall be governed by and construed in accordance with the

laws of England & Wales without regard to principles of conflicts of laws.”

13. Under Section 12.9 of the Indenture, the Republic appointed Banco de la Nación

Argentina, whose office address is 225 Park Avenue, New York, New York 10169, as its

authorized agent for service of process in connection with claims relating to bonds that are

governed by New York law, and agreed that, “if such person is not maintained by the Republic

as its agent for such purpose, the Republic will appoint CT Corporation System, to act as its

authorized agent.”

14. Also under Section 12.9 of the Indenture, the Republic appointed The Republic of

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Argentina Financial Representative Office in Europe, The Ministry of Economy, 78 Cornhill, 6th

Floor, London ECV 3QQ, United Kingdom, as its authorized agent for service of process in

connection with claims relating to bonds that are governed by English law, and agreed that, “if

such person is not maintained by the Republic as its agent for such purpose, the Republic will

appoint Banco de la Nación Argentina (Officina de Enlace), Longbow House, 14/20 Chiswell

Street, London EC1Y 4TD, United Kingdom, to act as its authorized agent.”

15. Section 12.9 of the Indenture further provides that Service of process upon the

Republic’s authorized agents shall be deemed, in every respect, effective service of process upon

the Republic.

16. Venue is proper in this district pursuant to 28 U.S.C. § 1391(f) and Section

12.8(b) of the Indenture, whereby the Republic waived any objections to claims relating to the

Exchange Bonds based on venue, residence, domicile, or forum non conveniens.

CLASS ACTION ALLEGATIONS

17. This action is brought as a class action, pursuant to Rules 23(a) and 23(b)(3) of

the Federal Rules of Civil Procedure. The Class is defined as follows:

All persons or entities who owned or have owned, or who own and currently
own, Exchange Bonds issued by the Republic of Argentina who have been
injured by Argentina’s failure to make interest on interest payments on the
Exchange Bonds.

18. Included in the Class are the Series of Exchange Bonds to which Argentina has

failed to make interest on interest payments. (See, ¶ 35; Ex. A).

19. This action is properly brought as a class action for the following reasons:

a. The members of the Class are so numerous that joinder of all members is

impracticable. While the exact number of Class members is unknown to Plaintiff at the present

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time, Plaintiff believes that the Class consists of at least two hundred (200) bond holder

investors. As of December 20, 2017, the Republic has issued approximately Thirty Three Billion

($33,000,000,000) Dollars of defaulted bonds as Exchange Bonds.

b. Plaintiff’s claims are typical of all members of the class because it and all

of the Class members sustained damages, which arise out of the Republic’s default under the

Indenture and the Debt Security agreements.

c. Plaintiff will fairly and adequately protect the interests of the members of

the Class. Plaintiff has retained competent counsel experienced in class action litigation. Plaintiff

has no interests antagonistic to those of the Class. Plaintiff is a sophisticated businessperson with

substantial negotiation and complex organizational experience. Members of the Class may be

identified from records maintained by the Republic, brokerage and transfer agents and may be

notified of the pendency of this action by mail and through the media, if required.

d. A class action is superior to all other available methods for the fair and

efficient adjudication of this controversy, because joinder of all members of the Class is

impracticable. Plaintiff knows of no difficulty in the management of this action that would

preclude its maintenance as a class action.

e. Questions of law and fact common to the members of the Class

predominate over any questions, which may affect only individual members, because the actions

of the Republic were generally applicable to and similarly affected the members of the Class.

Among the questions of fact and law involved herein which are common to the Class are:

(1) Whether the Republic, failed to remit to the Exchange Bondholders

interest on interest payments within the meaning of and as required by Section 4.4(a) of the

Indenture; and

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(2) Whether the members of Class sustained damages and, if so, the

appropriate measure thereof.

FACTUAL ALLEGATIONS

THE EXCHANGE BONDS

20. In 2001, the Republic defaulted on approximately $80 billion of public external

debt. In 2005 and 2010, the Republic offered holders of defaulted bonds new bonds with

substantially less favorable terms—the Exchange Bonds—in exchange for their defaulted bonds

(the “Exchange Offers”).

21. The Exchange Bonds, including the terms of payment, are governed by the

Indenture, as well as the Debt Securities, as defined in Section 1.1 of the Indenture, of a

particular series of Exchange Bonds.

22. Under the Indenture, the Republic is required to make principal and periodic

interest payments on the Exchange Bonds at the time specified in the applicable Debt Securities.

Specifically, Section 3.1 provides: “The Republic covenants and agrees that it will duly and

punctually pay or cause to be paid the principal of and interest . . . on each of the Debt Securities

. . . at the respective times and in the manner provided for in the Debt Securities.”

23. Likewise, pursuant to Section 4.9 of the Indenture, Holders of Exchange Bonds,

as defined in the Indenture, “shall have the right, which is absolute and unconditional, to receive

payment of the principal of and interest on its Debt Security on the stated maturity date for such

payment expressed in such Debt Security.”

24. Pursuant to Section 4.8, “[t]he Republic expressly acknowledges, with respect to

the right of any Holder to pursue a remedy under this Indenture or the Debt Securities, the right

of any beneficial holder of Debt Securities to pursue such remedy with respect to the portion of

the Global Security that represents such beneficial holder’s Debt Securities as if definitive Debt

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Securities had been issued to such Holder.”

25. In the event the Republic defaults on any periodic interest payments due on the

Debt Securities, the Indenture also requires the Republic to pay interest on those missed periodic

interest payments. Specifically, Section 4.4(a) requires that:

in case there shall be a default in the payment of any interest on

[the Exchange Bonds] when such interest shall have become due
and payable, and such default shall have continued for a period
specified in Section 4.1(i) above . . . then upon demand of the
Trustee, the Republic will pay to the Trustee for the benefit of the
Holders . . . the whole amount that shall have become due and
payable on all Outstanding Debt Securities of such Series for
principal or interest, as the case may be (with interest to the date of
such payment upon overdue principal and, to the extent that
payment of such interest is enforceable under applicable law, on
overdue installments of interest at the rate of overdue interest
specified in such Debt Securities…

(Emphasis added)

26. Accordingly, the Republic is liable to Plaintiff for payment “on overdue

installments of interest at the rate of overdue interest specified in such Debt Securities.”

27. Section 4.1 of the Indenture lists circumstances that constitute an “Event of

Default” in relation to the Exchange Bonds. Under Section 4.1(i), an Event of Default occurs

upon “Non-Payment”: when “the Republic fails to pay any principal of any of the [Exchange

Bonds] when due and payable and such failure continues for 30 days or fails to pay any interest

on the [Exchange Bonds] when due and payable and such failure continues for a period of 30

days.” (Emphasis added).

28. The terms and conditions of the Debt Securities, a form of which is attached to the

Indenture as an exhibit (i.e., C), further make clear that “the Republic’s obligation to make

payments of principal of and interest on the [Debt] Securities shall not have been satisfied until

such payments are received by the Holders of the [Debt] Securities.” (Emphasis added).

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THE REPUBLIC DEFAULTS ON THE EXCHANGE BONDS

29. Certain holders of defaulted debt (the “Holdout Creditors”), declined the

Republic’s Exchange Offers. The Republic proceeded to make payments on the Exchange

Bonds, but did not pay the Holdout Creditors.

30. In turn, certain Holdout Creditors commenced legal action in the United States

District Court for the Southern District of New York (the “District Court”) against the Republic,

seeking payment in full under their defaulted bonds.

31. When those Holdout Creditors obtained monetary judgments against the

Republic, the Republic refused to honor the judgments.

32. As a result, the District Court issued an injunction (the “Injunction”) providing

that, whenever the Republic fulfilled its obligation to make a payment under the Exchange

Bonds, it must also make a “ratable payment” to the Holdout Creditors.

33. The District Court extended application of the Injunction to all intermediaries in

the payment chain for the Exchange Bonds, including BNY Mellon.

34. The Injunction became effective on June 18, 2014.

35. Thereafter following the effective date of this Court’s Injunction, on June 26,

2014 and then on September 13, 2014, the Republic attempted to make periodic interest payment

on certain Exchange Bonds by remitting the due and owing amounts to accounts held by BNY

Mellon and Nacion Fideicomisos in their capacity as trustees under the Indenture.

36. Those amounts were not received by the Exchange Bondholders, placing the

Republic in default on the Exchange Bonds.

37. After September 2014, the Republic did not attempt to make further periodic

interest payments on the Exchange Bonds until the Injunction was vacated on April 22, 2016,

thus continuing its default on those bonds.

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38. Specifically, the Republic defaulted on interest payments due on June 30, 2014;

December 31, 2014; June 30, 2015; and December 31, 2015 on the following series of Exchange

Bonds: (i) 8.28% U.S. Dollar-denominated Discount Bonds, ISIN No. XS0501194756; (ii)

8.28% U.S. Dollar-denominated Discount Bonds, ISIN No. XS0501195050; (iii) 7.82% Euro-

denominated Discount Bonds, ISIN No. XS0501195308; (iv) 7.82% Euro-denominated Discount

Bonds, ISIN No. XS0501195134; (v) 7.82% Euro-denominated Discount Bonds, ISIN No.

XS0205545840; and (vi) 8.28% U.S. Dollar-denominated Discount Bonds, CUSIP No.

040114GL8.

39. The Republic defaulted on interest payments due on September 30, 2014; March

31, 2015; September 30, 2015; and March 31, 2016 on the following series of Exchange Bonds:

(i) 2.50% U.S. Dollar-denominated PAR Bonds, ISIN No. XS0501195720; (ii) 2.50% U.S.

Dollar-denominated PAR Bonds, ISIN No. XS0501195647; (iii) 2.26% Euro-denominated PAR

Bonds, ISIN No. XS0501196025; (iv) 2.26% Euro-denominated PAR Bonds, ISIN No.

XS0501195993; (v) 2.26% Euro-denominated PAR Bonds, ISIN No. XS0205537581; and (vi)

2.50% U.S. Dollar-denominated PAR Bonds, CUSIP No. 040114GK0.

40. The Republic defaulted on interest payments due on December 2, 2014 and June

2, 2015 on the following series of Exchange Bonds: 8.75% Global Bonds, ISIN No.

XS0501195480.

THE REPUBLIC PAYS PAST DUE INTEREST, BUT NOT INTEREST-ON-INTEREST

41. On April 19, 2016, the District Court ordered that, upon vacatur of the Injunction,

the Republic was “authorized and directed to perform all of its obligations under the Indenture”

that governs the Exchange Bonds. On April 22, 2016, the District Court vacated the Injunction.

42. On May 5, 2016, BNY Mellon distributed the Republic’s past due periodic

interest payments on the Exchange Bonds.

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43. Per the District Court’s April 19, 2016 order, the record date for purposes of those

payments was April 29, 2016.

44. When remitting payments to the Exchange Bondholders following vacatur of the

Injunction, the Republic - acting with malice, insult, reckless and willful disregard of plaintiff's

rights to be paid interest on the missed periodic interest payments - purposefully failed to include

interest on the missed periodic interest payments, as required under Section 4.4(a) of the

Indenture.

45. To date, although duly demanded, the Republic has willfully failed and refused to

pay such “interest-on-interest.”

46. The willfulness of the Republic’s actions is separate and distinct from its

contractual obligations to pay “interest on interest” payments as the Republic has sought to exert

economic pressure on the Exchange Bondholders (and Plaintiff) to forego its entitlements to

interest on interest payments by its exercise of unauthorized assumption of the right of ownership

over goods belonging to the Plaintiff, which pressure was exerted with malice and reckless

disregard to the Exchange Bondholder’s ownership rights in the Exchange Bonds and the

“interest on interest” payments stemming therefrom.

47. The Republic’s actions have resulted in the conversion of the property of the

Plaintiff.

48. The value of the missed periodic interest payments on each series of Exchange

Bonds, as well as the aggregate value of those interest payments on each series which were paid

by the Republic on May 5, 2016, is reflected in a notice from BNY Mellon dated May 2, 2016.

A true and correct copy of BNY Mellon’s May 2, 2016 notice is attached hereto as Exhibit “C”.

Specifically:

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(i) On the series of 8.28% U.S. Dollar-denominated discount bonds, ISIN No.
XS0501194756, the Republic paid a total of $214,587,273.52 in past due interest.
The Republic did not pay the corresponding “interest on interest”.

(ii) On the series of 8.28% U.S. Dollar-denominated discount bonds, ISIN No.
XS0501195050, the Republic paid a total of $1,313,350.28 in past due interest.
The Republic did not pay the corresponding “interest on interest”.

(iii) On the series of 7.82% Euro-denominated discount bonds, ISIN No.

XS0501195308, the Republic paid a total of €735,604.56 in past due interest. The
Republic did not pay the corresponding “interest on interest”.

(iv) On the series of 7.82% Euro-denominated discount bonds, ISIN No.

XS0501195134, the Republic paid a total of €415,518,261.80 in past due interest.
The Republic did not pay the corresponding “interest on interest”

(v) On the series of 7.82% Euro-denominated discount bonds, ISIN No.

XS0205545840, the Republic paid a total of €487,156,036.28 in past due interest.
The Republic did not pay the corresponding “interest on interest”

(vi) On the series of 8.28% U.S. Dollar-denominated discount bonds, CUSIP No.
040114GL8, the Republic paid a total of $707,789,460.76 in past due interest.
The Republic did not pay the corresponding “interest on interest”

(vii) On the series of 2.50% U.S. Dollar-denominated par bonds, ISIN No.
XS0501195720, the Republic paid a total of $81,717.96 in past due interest. The
Republic did not pay the corresponding “interest on interest”

(viii) On the series of series of 2.50% U.S. Dollar-denominated par bonds, ISIN No.
XS0501195647, the Republic paid a total of $4,765,241.00 in past due interest.
The Republic did not pay the corresponding “interest on interest”

(ix) On the series of 2.26% Euro-denominated par bonds, ISIN No. XS0501196025,
the Republic paid a total of €505,477.20 in past due interest. The Republic did
not pay the corresponding “interest on interest”

(x) On the series of 2.26% Euro-denominated par bonds, ISIN No. XS0501195993,
the Republic paid a total of €64,506,176.84 in past due interest. The Republic did
not pay the corresponding “interest on interest”

(xi) On the series of 2.26% Euro-denominated par bonds, ISIN No. XS0205537581,
the Republic paid a total of €227,578,030.00 in past due interest. The Republic
did not pay the corresponding “interest on interest”

(xii) On the series of 2.50% U.S. Dollar-denominated par Bonds, CUSIP No.
040114GK0, the Republic paid a total of $264,834,459.76 in past due interest.
The Republic did not pay the corresponding “interest on interest”

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(xiii) On the series of 8.75% .S. Dollar-denominated global bonds, ISIN No.
XS0501195480, the Republic paid a total of $126,759,110.88 in past due interest.
The Republic did not pay the corresponding “interest on interest”

49. Numerous demands have been made to responsible officials in the Republic for

the “interest on interest” payments due.

50. Though such responsible officials have acknowledged the Republic’s obligation

to pay such “interest on interest” payments, the Republic continues to willfully fail and refuse to

make such payments.

51. The actions of the officials responsible for the Republic’s obligation to pay such

“interest on interest” payments was a manifest intent by such individuals to, with reckless

disregard and malice, willfully refuse to make “interest on interest” payments.

52. Subsequently, on May 31, 2016, BNY Mellon sent a letter to the Republic

demanding default interest to be paid under Section 4.4(a). See, Exhibit “D”

53. Despite written demand for payment of “interest on interest” on the Exchange

bonds as described herein, the Republic continues to willfully fail to pay and refuse to honor its

acknowledged express obligation to pay such debts and recognize its liability.

54. Accordingly, Plaintiffs are entitled to 9% interest beginning on May 31, 2016 on

the unpaid interest payments referenced in the demand letter and continuing to date until paid.

COUNT ONE
(Breach of Contract)

55. Plaintiff repeats, realleges, and incorporates by reference each and every

allegation previously made herein as if the same were more fully set forth at length herein.

56. The Republic defaulted on the Exchange Bonds when it missed payments of

interest due as described herein.

57. Pursuant to Section 4.4(a) of the Indenture and the Debt Security governing the

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Exchange Bonds, the Republic is required to pay interest that has accrued on those missed

interest payments.

58. On April 19, 2016, the District Court ordered that, upon vacatur of the Injunction,

the Republic was “authorized and directed to perform all of its obligations under the Indenture”

that governs the Exchange Bonds.

59. The Republic’s obligations under the Indenture include the payment of “interest-

on-interest” pursuant to Section 4.4(a) of the Indenture.

60. The Republic has failed to make any payments of “interest-on-interest” on the

Exchange Bonds, despite the requirements of the Indenture and the District Court’s order.

61. By reason of the foregoing, the Republic has breached its contractual obligations

to DRAW Capital and the Class, and the Republic is liable to DRAW Capital and the Class for

damages in an amount to be determined at trial, but not less than Three Hundred Million

(300,000,000) Dollars.

COUNT TWO
(Conversion)
62. Plaintiff repeats, realleges, and incorporates by reference each and every

allegation previously made herein as if the same were more fully set forth at length herein.

63. DRAW Capital and the Class owns and/or has the right to possess the “interest-

on-interest” on the Exchange Bonds.

64. The Republic intentionally interfered with and/or exercised dominion and control

over Plaintiff’s ownership and entitlement over the “interest-on-interest” payments on the

Exchange Bonds.

65. The Republic deprived Plaintiff of possession or use of the “interest-on-interest”

on the Exchange Bonds by unlawfully withholding such “interest on interest” payments.

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66. The Republic’s actions were made with malice and willful and reckless disregard

to the ownership rights of the Plaintiff(s).

67. As a result, the Republic’s interference caused damages to Plaintiffs in an amount

to be determined at trial, but not less than Three Hundred Million ($300,000,000) Dollars.

PRAYER FOR RELIEF

WHEREFORE, demands judgment against Defendant the Republic of Argentina for the

following relief:

I. At least Three Hundred Million ($300,000,000) Dollars as an award of actual

damages in respect of the Republic’s breach of contract as described herein;

II. At least Three Hundred Million ($300,000,000) Dollars as an award of actual

damages in respect of the Republic’s conversion of Plaintiff’s’ property as

described herein;

III. An award of prejudgment interest at no less than 9% from May 31, 2016, which is

currently approximated at Fifty Million ($50,000,000) Dollars;

IV. An award of prejudgment interest, costs, punitive damages and attorney’s fees;

and

V. Such other and further relief that the Court may deem just and proper.

Dated: New York, New York

January 22, 2018
Respectfully submitted,
SACK & SACK, LLP
_____/s/ Jonathan Sack___________
By: Jonathan S. Sack, Esq. (JSS 1835)
Attorneys for Plaintiff
70 East 55th Street, 10th Floor
New York, New York 10022
Tel.: (212) 702-9000
Fax: (212) 702-9702

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