Cleary Gottlieb recently won an appeal for Argentina’s Mendoza Province before the Second Circuit, which unanimously affirmed the use of exit consents in the Province’s 2004 sovereign debt restructuring. Through these exit consents (which are a critical feature of virtually all recent sovereign debt restructurings), bondholders accepting an exchange or purchase offer for non-performing debt simultaneously agree to specified amendments to the indenture governing the tendered debt. In this case, these modifications included an amendment to the Province’s broad waiver of sovereign immunity to make it inapplicable to payment on the new bonds to be issued in the exchange offer.
In the district court, plaintiff Greylock, a distressed debt fund, tried to enjoin closing of the exchange offer, arguing that the amendments improperly limited its “absolute and unconditional” right to receive payment of principal and interest and to institute suit for enforcement of any such payment. District Judge Harold Baer denied Greylock’s request for a preliminary injunction and, following discovery, granted summary judgment in the Province’s favor in February 2005. The court of appeals agreed with Judge Baer’s ruling that the indenture did not preclude adoption of the amendments, and rejected Greylock’s other arguments from a related case. Cleary won dismissal of the appeal of the related case last fall.
Cleary has represented Argentina in more than two hundred cases brought around the world arising out of Argentina’s 2001 debt crisis, including defeating attempts to block Argentina’s 2005 restructuring of $62.5 billion in principal amount of sovereign debt. For more than 25 years, Cleary has represented sovereigns throughout the world in managing their external debt.