Opinion
04 Civ. 3639 (TPG).
February 17, 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 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 March 22, 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).
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: Dates Of Purchase: Acceleration: Contract Documents: Evidence of Ownership Proffered:
: Vanina Andrea Exposito U.S. $ 133,000.00 ISIN No. US04114AV28 Not provided. September 19, 2027. 9.75% September 23, 1999 ($77,000); June 1, 2000 ($56,000). March 22, 2005. FAA dated October 19, 1994. (FAA; FRB; Indenture; Offering Prospectus; Certificates, etc.) — Purchase statements from Banco Generale de Negocios dated September 23, 1999 and June 1, (Account Statements; 2000. Letters; Notarized Statements, etc.) — Account statements from Caja de Valores as of March 31, 2005.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 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 agreed to waive objections based on lack of authorization where a plaintiff provides confirmation slips or other proof of purchase for any purchase of beneficial interests on or after the default date of December 24, 2001, and where the court makes a finding at an appropriate time of current ownership. See Transcript, Sept. 28, 2005, H.W. Urban GmbH v. Republic of Argentina (02 Civ. 5699).
Here, plaintiff has adequately demonstrated through her account statements that she acquired the beneficial interests in September 1999 and June 2000, and still owned them as of March 31, 2005. There is no evidence of any change of ownership thereafter.
Acceleration of Principal
The Republic argues that plaintiff has not effected acceleration of the principal, as it claims to have done. The Republic argues that acceleration of principal can only occur at the behest of holders of 25% or more of the principal amount of securities of a series. This is incorrect. Under Paragraph 12 of the FAA, where a default in the payment of interest or a default by declaring a moratorium occurs, "each holder" may give notice and declare principal due and payable immediately, and such notice will cause the acceleration unless the default has been cured or other conditions have been fulfilled, which are not relevant here.
CONCLUSION
Plaintiff's 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, 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.