Capital Ventures International v. the Republic of Argentina

Full title: CAPITAL VENTURES INTERNATIONAL, Plaintiffs, v. THE REPUBLIC OF ARGENTINA…

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

Date published: Aug 28, 2006

06 Civ. 207 (TPG) (S.D.N.Y. Aug. 28, 2006)

Opinion

06 Civ. 207 (TPG).

August 28, 2006

OPINION

THOMAS GRIESA, Senior District Judge

Plaintiff is the beneficial owner of certain bond indebtedness issued by defendant The Republic of Argentina. The Republic defaulted on such indebtedness in December 2001 during a profound fiscal crisis. Plaintiff is suing to recover amounts due to it as a result of the default and has moved for 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 Corporation Ltd. v. Republic of Argentina, No. 02 Civ. 3804, 2003 WL 1878420 (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 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 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 and 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. Republic of Argentina, No. 02 Civ. 1773, 2003 WL 1990206, at *1 (S.D.N.Y. Apr. 29, 2003). On January 5, 2006, plaintiff sent a notice to Bankers Trust Company, the Fiscal Agent of The Republic of Argentina, declaring the principal amounts of the debt securities held by plaintiff to be immediately due and payable.

The bonds that are the subject of this action are listed hereafter. Also listed are the amounts of the beneficial interests owned by plaintiff.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 Argentina, No. 04 Civ. 1048, 2005 U.S. Dist. LEXIS 23904 (S.D.N.Y. Oct. 17, 2005).

The following tables contain the necessary identifying information regarding plaintiff's beneficial interests in bonds.

Table 1.

Plaintiff Bond Holder or Beneficial Owner: Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Capital Ventures International U.S. $ 8,000.000.00 CUSIP No. 040114GD6; ISIN No. US040114GD65 None given. February 21, 2012 12.375% On or about October 18 and 19, 2005. Notice sent January 5, 2006. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Merrill Lynch dated April 14, 2006; letter from Merrill Lynch dated (Account Statements; March 15, 2006. Letters; Notarized Statements, etc.)

Table 2.

Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Capital Ventures International : U.S. $ 1,000,000.00 CUSIP No. 040114AZ3; ISIN No. US04114AZ32 December 4, 1998. December 4, 2005. 11% On or about December 13, 2005. Notice sent January 5, 2006. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Merrill Lynch dated April 14, 2006; letter from Merrill Lynch dated (Account Statements; March 15, 2006. Letters; Notarized Statements, etc.)

Table 3.

Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Capital Ventures International : U.S. $ 16,390,000.00 CUSIP No. 040114BE9; ISIN No. US040114BE93 April 7, 1999. April 7, 2009. 11.75% Between October 31 and November 22, 2005. Notice sent January 5, 2006. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Merrill Lynch dated April 14, 2006; letter from Merrill Lynch dated (Account Statements; March 15, 2006. Letters; Notarized Statements, etc.)

Table 4.

Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Capital Ventures International : U.S. $ 5,000,000.00 CUSIP No. 040114GG9; ISIN No. US040114GG96 June 19, 2001. June 19, 2018. 12.25% Between November 21, 2005 and December 13, 2005. Notice sent January 5, 2006. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Merrill Lynch dated April 14, 2006; letter from Merrill Lynch dated (Account Statements; March 15, 2006. Letters; Notarized Statements, etc.)

Table 5.

Plaintiff Bond Holder or Beneficial Owner: Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Capital Ventures International U.S. $ 21,000,000.00 CUSIP No. 040114GH7; ISIN No. US040114GH79 None given. June 19, 2031. 12% On or about October 18 and 19, 2005. Notice sent January 5, 2006. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Merrill Lynch dated April 14, 2006; letter from Merrill Lynch dated (Account Statements; March 15, 2006. Letters; Notarized Statements, etc.)

Table 6.

Plaintiff Bond Holder or Beneficial Owner Face Value: CUSIP No., ISIN No., BB No.: Date Of Issuance: Date Of Maturity: Interest Rate/Payable: Date Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered: Capital Ventures International : EURO 2,753,000.00 CUSIP No. 008633347; ISIN No. XS0086333472 April 21, 1998. April 21, 2008. 8.125 % Between June 9, 2005 and December 1, 2005. Notice sent January 5, 2006. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Account statement from Merrill Lynch dated April 14, 2006; letter from Merrill Lynch dated (Account Statements; March 15, 2006. Letters; Notarized Statements, etc.)

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 October 19, 1994 FAA. See Mazzini v. Republic of Argentina, No. 03 Civ. 8120, 2005 U.S. Dist. LEXIS 5692 (S.D.N.Y. Mar. 31, 2005). Only certain specific issues need to be discussed in connection with the present motion.

Standing and Proof of Ownership

In the two opinions 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 plaintiff 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 Argentina (04 Civ. 6594).

Here, plaintiff has adequately demonstrated through its account statements that it owned the beneficial interests as of April 2006. 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 plus accrued interest.

The parties shall consult with one another concerning the form of the judgment and the amounts of interest that should be awarded in the judgment. If the parties are able to reach agreement on those subjects, they shall jointly submit an agreed proposed judgment to the court. If the parties are unable to reach agreement on those subjects, plaintiff shall submit a proposed judgment to the court, and the Republic shall submit any objections to plaintiff's proposed judgment within five business days thereafter. The court will then resolve any remaining disagreements.

SO ORDERED.