Drawrah Limited v. Republic of Argentina

Full title: DRAWRAH LIMITED, et al. Plaintiffs, v. THE REPUBLIC OF ARGENTINA, Defendant

Court: United States District Court, S.D. New York

Date published: Feb 24, 2011

09 Civ. 8299 (TPG) (S.D.N.Y. Feb. 24, 2011)

Opinion

09 Civ. 8299 (TPG).

February 24, 2011

OPINION

THOMAS GRIESA, District Judge

Plaintiffs are the beneficial owners of certain bond indebtedness issued by defendant, the Republic of Argentina ("Republic"), on which the Republic defaulted in December 2001. Plaintiffs are suing to recover amounts due to them as a result of the default and have moved for summary judgment. The Republic has no objection to the entry of summary judgment.

The motion is granted.

FACTS

The bond indebtedness at issue is governed by a Fiscal Agency Agreement dated October 19, 1994 (the "1994 FAA"). The 1994 FAA is the same agreement that governed the bond indebtedness on which this court granted summary judgment to the plaintiffs inLightwater Corp. Ltd. v. Republic of Argentina, No. 02 Civ. 3804, 2003 WL 1878420, at *1 (S.D.N.Y. Apr. 14, 2003). Section 22 of the 1994 FAA states that the Republic waives sovereign immunity and consents to jurisdiction in any state or federal court in the borough of Manhattan in the City of New York. The 1994 FAA also provides that the Republic's obligations on the bonds are unconditional and that failure to make any payment of principal or interest for 30 days after the applicable payment date constitutes an event of default. A declaration by the Republic of a moratorium on the payment of principal or interest on its public external indebtedness is an event of default as well. Paragraph 12 of the 1994 FAA provides for acceleration of principal if there is a failure to pay interest or a moratorium. If either of these events occurs,

each holder of Securities of such Series may by such notice in writing declare the principal amount of Securities of such Series held by it to be due and payable immediately. . . .

On December 24, 2001, the Republic declared a moratorium on payments of principal and interest on the external debt of the Republic. The court refers to its previous opinions for a description of the circumstances of these defaults. Lightwater, 2003 WL 1878420, at *2; Applestein v. Province of Buenos Aires, No. 02 Civ. 1773, 2003 WL 1990206, at *1 (S.D.N.Y. Apr. 29, 2003). On or about September 9, 2009, plaintiffs sent notices to the Fiscal Agent of the Republic of Argentina, providing notice of an event of default, demanding payment on certain bonds governed by the 1994 FAA, and declaring the principal amount of the other debt securities governed by the 1994 FAA to be immediately due and payable.

The bonds that are the subject of this action, and the amounts of beneficial interests owned by plaintiffs, are listed in the following tables.¹

1 The court notes the distinction between bonds and beneficial interests. In some previous opinions, the court has simply referred to the plaintiffs as owners of "bonds," when in fact plaintiffs are technically owners of "beneficial interests in bonds." The Republic actually issues "a bond" to a depository. The depository, in some form, issues "participations" to brokers, who sell "beneficial interests" to purchasers. These beneficial interests are identified by reference to the underlying bond (CUSIP or ISIN number or both; date of issuance and maturity; rate of interest) and the principal amount of the beneficial interest. This distinction is discussed more fully in Million Air Corp. v. Republic of Arg., No. 04 Civ. 1048, 2005 WL 2656126, at *1-2 (S.D.N.Y. Oct. 17, 2005).

Table 1.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB ALEXANDRA STRATEGIES : PORTFOLIO : U.S. $ 570,000 : ISIN No. US040114AV28 : September 19, 1997 : September 19, 2027 : 9.750% : April 2008 and June 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 31, 2009 and May 5, 2010

Table 2.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB ALEXANDRA STRATEGIES : PORTFOLIO : U.S. $ 969,000 : ISIN No. US040114GG96 : June 19, 2001 : June 19, 2018 : 12.250% : April 2008 and June 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 31, 2009 and May 5, 2010

Table 3.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB ALEXANDRA STRATEGIES : PORTFOLIO : U.S. $ 774,000 : ISIN No. US040114GH79 : June 19, 2001 : June 19, 2031 : 12% : April 2008 and June 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 31, 2009 and May 5, 2010

Table 4.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB IMMOBILIEN PLUS : : U.S. $ 500,000 : ISIN No. US040114GG96 : June 19, 2001 : June 19, 2018 : 12.250% : May 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 30, 2009 and June 2, 2010

Table 5.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB IMMOBILIEN PLUS : : U.S. $ 500,000 : ISIN No. US040114GH79 : June 19, 2001 : June 19, 2031 : 12% : May 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 30, 2009 and June 2, 2010

Table 6.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB DACHFONDS — VENIVIDIVICI : : U.S. $ 500,000 : ISIN No. US040114GG96 : June 19, 2001 : June 19, 2018 : 12.250% : June 2009 and July 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 31, 2009 and May 5, 2010

Table 7.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB DACHFONDS — VENIVIDIVICI : : U.S. $ 1,000,000 : ISIN No. US040114GH79 : June 19, 2001 : June 19, 2031 : 12% : June 2009 and July 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 31, 2009 and May 5, 2010

Table 8.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB GOLD SILBER PLUS : : U.S. $ 1,050,000 : ISIN No. US040114GG96 : June 19, 2001 : June 19, 2018 : 12.250% : July 2009 and August 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 30, 2009 and May 3, 2010

Table 9.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB GOLD SILBER PLUS : : U.S. $ 670,000 : ISIN No. US040114GH79 : June 19, 2001 : June 19, 2031 : 12% : July 2009 and August 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 30, 2009 and May 3, 2010

Table 10.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB PORTFOLIO EXTRA PLUS : : U.S. $ 1,000,000 : ISIN No. US040114GG96 : June 19, 2001 : June 19, 2018 : 12.250% : August 2008 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 31, 2009 and May 5, 2010

Table 11.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered HWB PORTFOLIO EXTRA PLUS : : U.S. $ 1,070,000 : ISIN No. US040114GH79 : June 19, 2001 : June 19, 2031 : 12% : August 2008 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statements from LBBW Luxemburg : S.A. dated as of December 31, 2009 and May 5, 2010

Table 12.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered VICTORIA STRATEGIES PORTPOLIO LTD. : : U.S. $ 530,625 : ISIN No. US040114GG96 : June 19, 2001 : June 19, 2018 : 12.250% : May 2009 and August 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statement from LBBW Luxemburg : S.A. dated as of January 6, 2010.

Table 13.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered VICTORIA STRATEGIES PORTPOLIO LTD. : : U.S. $ 7,308,700 : ISIN No. US040114GH79 : June 19, 2001 : June 19, 2031 : 12% : May 2009 and August 2009 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statement from LBBW Luxemburg : S.A. dated as of January 6, 2010.

Table 14.

Plaintiff Bond Holder or Beneficial Owner Face Value ISIN No. Date Of Issuance Date Of Maturity Interest Rate/Payable Date Of Purchase Notice of Acceleration Contract Documents Evidence of Ownership Proffered DRAWRAH LIMITED : : U.S. $ 30,000 : ISIN No. US040114FC91 : March 15, 2000 : March 15, 2010 : 11.375% : December 8, 2005 : September 24, 2009 : FAA dated as of October 19, 1994 Account Statement from Banque from : Luxembourg dated as of December 31, 2009.

DISCUSSION

This court has already granted summary judgment in other cases to plaintiffs seeking to collect on the Republic's defaulted bonds issued under the 1994 FAA. See, e.g., Mazzini v. Republic of Arg., No. 03 Civ. 8120, 2005 WL 743090, at *1 (S.D.N.Y. Mar. 31, 2005). Only standing and proof of ownership need to be discussed in connection with the present motion.

In Fontana v. Republic of Argentina, 415 F.3d 238 (2d Cir. 2005), and Applestein v. Province of Buenos Aires, 415 F.3d 242 (2d Cir. 2005), the Second Circuit has held that an owner of a beneficial interest, such as plaintiffs here, must receive authorization from the registered holder of the bond before it may sue, but that such authorization may be granted subsequent to the filing of a lawsuit. Alternatively, the Republic may waive the authorization requirement.

The Republic has agreed to waive objections based on lack of authorization where the court makes a finding of current ownership. See Transcript, March 28, 2006, Cilli v. Republic of Arg. (04 Civ. 6594).

Here, plaintiffs have adequately demonstrated through their account statements that they owned their beneficial interests as of the dates set forth in the respective declarations. There is no evidence of any change of ownership thereafter.

CONCLUSION

The motion for summary judgment is granted. Judgment will be entered for the principal amount of the bonds issued under the 1994 FAA plus accrued interest.

Settle judgment.

SO ORDERED.

Dated: New York, New York

February 24, 2011