Opinion
05 Civ. 5197 (TPG).
August 9, 2006
OPINION
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 denied.
FACTS
The bond indebtedness at issue is governed by Fiscal Agency Agreements dated December 10, 1993 (the "1993 FAA") and 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 and Section 20 of the 1993 FAA state 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. Both FAAs provide 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 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. . . .
The 1993 FAA contains similar language.
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 25, 2005 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.
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).
Table 1.
Plaintiff Beneficial Owner: Meridian InvestmentsFace Value: U.S. $ 3,820,000.00
CUSIP No., ISIN No., BB CUSIP No. 040114AN0; ISIN No. US04114AN02No.:Date Of Issuance: October 9, 1996.
Date Of Maturity: October 9, 2006.
Interest Rate/Payable: 11 %
Date Of Purchase: September 4, 1997.
Acceleration: November 25, 2005.
Contract Documents: FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.)
Evidence of Ownership NOT PROVIDED. Proffered: (Account Statements; Letters; Notarized Statements, etc.)
Table 2.
Plaintiff Beneficial Owner: Meridian InvestmentsFace Value: U.S. $ 3,234,000.00
CUSIP No., ISIN No., BB CUSIP No. 040114AH3; ISIN No. US040114AH34No.:Date Of Issuance: December 20, 1993.
Date Of Maturity: December 20, 2003.
Interest Rate/Payable: 8.375%
Date Of Purchase: December 20, 2001.
Acceleration: November 25, 2005.
Contract Documents: FAA dated December 10, 1993. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.)
Meridian mistakenly asserts that this bond was issued pursuant to the 1994 FAA.
Evidence of Ownership NOT PROVIDED. Proffered: (Account Statements; Letters; Notarized Statements, etc.)
Table 3.
Plaintiff Beneficial Owner: Meridian InvestmentsFace Value: U.S. $ 2,000,000.00
CUSIP No., ISIN No., BB CUSIP No. 040114GF1; ISIN No. US040114GF14No.:Date Of Issuance: December 19, 2001.
Date Of Maturity: December 19, 2008.
Interest Rate/Payable: 7%
Date Of Purchase: July 12, 2004.
Acceleration: November 25, 2005.
Contract Documents: FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.)
Evidence of Ownership NOT PROVIDED. Proffered: (Account Statements; Letters; Notarized Statements, etc.)
Table 4.
Plaintiff Beneficial Owner: Meridian InvestmentsFace Value: U.S. $ 1,709,000.00
CUSIP No., ISIN No., BB CUSIP No. 040114BE9; ISIN No. US040114BE93No.:Date Of Issuance: April 7, 1999.
Date Of Maturity: April 7, 2009.
Interest Rate/Payable: 11.75 %
Date Of Purchase: October 30, 2003.
Acceleration: November 25, 2005.
Contract Documents: FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.)
Evidence of Ownership NOT PROVIDED. Proffered: (Account Statements; 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 FAAs. 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 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, as indicated in the charts above, plaintiff has failed to adequately demonstrate through account statements or any other documentation that it that owns the beneficial interests at issue. Other than the 1994 FAA and an underwriting agreement, the only document that plaintiff includes with its motion is a notice of acceleration. While that notice is sufficient to demonstrate acceleration of plaintiff's interests, it is insufficient to prove ownership thereof.
CONCLUSION
Plaintiff's motion for summary judgment is denied.
SO ORDERED.