Opinion
No. 05 Civ. 3328 (TPG).
February 22, 2006
OPINION
Plaintiffs are the beneficial owners 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. Plaintiffs are suing to recover amounts due to them as a result of the default and have 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 in Lightwater 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,
Unlike many of the debt securities at issue in other cases involving Argentine debt before this court, the notes in this case have no fixed interest rate, and are known as "Floating Rate Accrual Notes," or FRANs. For ease of reference, the court will nonetheless refer to the indebtedness on these notes as "bond indebtedness."
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 November 18, 2004 and March 18, 2005, plaintiffs sent notices to the Fiscal Agent of The Republic of Argentina declaring the principal amounts of the debt securities held by plaintiffs 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 plaintiffs.
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 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 — Account statement from Citigroup Global Proffered: Table 2. Plaintiff 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 — Account statement from Citigroup Global Proffered:
: FFI Fund Ltd. U.S. $ 69,275,000.00 CUSIP No. 040114AX8; ISIN No. US04114AX83 March 27, 1998 April 10, 2005. Floating Interest Rate. Not provided. November 18, 2004 and March 18, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) Markets Inc. for the period June 1, 2005 to June (Account Statements; 30, 2005. Letters; Notarized Statements, etc.) : FYI Fund Ltd. U.S. $ 46,100,000.00 CUSIP No. 040114AX8; ISIN No. US04114AX83 March 27, 1998 April 10, 2005. Floating Interest Rate. Not provided. November 18, 2004 and March 18, 2005. FAA dated October 19, 1994. (FAA; Indenture; Offering Prospectus; Certificates, etc.) Markets Inc. for the period June 1, 2005 to June (Account Statements; 30, 2005. 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. This has occurred inLightwater, supra, and other cases. 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 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. Here, Citigroup Global Markets Inc., plaintiffs' broker, obtained authorization to sue from Cede Co., the holder of the bonds at issue. Citigroup in turn granted permission to sue to plaintiffs.
With regard to current ownership, plaintiffs have adequately demonstrated that they owned the relevant beneficial interests as of June 30, 2005. There is no evidence of any change of ownership thereafter.
Acceleration of Principal
The Republic argues that plaintiffs have not effected acceleration of the principal because, due to certain repurchase agreements, they did not own all of the beneficial interests at the time of acceleration. This issue moot, however, because regardless of whether the acceleration notices were effective, the principal amount of the bonds was due to be paid on April 10, 2005, and as such is now owed to plaintiffs.
CONCLUSION
Plaintiffs' 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 unable 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, plaintiffs shall submit a proposed judgment to the court, and the Republic shall submit any objections to plaintiffs' proposed judgment within five business days thereafter. The court will then resolve any remaining disagreements.
SO ORDERED.