Sovereign Debt Litigation: District Court Order Paves the Way for the Republic of Argentina to Return to International Credit Markets

Sullivan & Cromwell LLP - Updated March 10, 2016

In an important decision in the long-running Argentine debt litigation, the United States District Court for the Southern District of New York ruled yesterday that injunctions prohibiting the Republic of Argentina from paying holders of certain sovereign Argentine debt without first paying holdout bondholders will be automatically vacated once several conditions are met.  The injunctions, in effect since 2014, effectively prevent Argentina from issuing new international debt because those injunctions bar Argentina from repaying that debt, and even issuing new debt could be alleged to be an illegal attempt to evade the injunctions.  There is uncertainty as to exactly when the injunctions will be lifted because the effect of the order has been stayed for two weeks by the United States Court of Appeals for the Second Circuit, certain bondholders have appealed the district court’s decision, and the injunctions will not be vacated in any event unless several conditions are met.  Nonetheless, this order paves the way for Argentina to regain access to international credit markets after a 15-year absence.  The order also enables Argentina to raise capital to begin paying plaintiffs with whom Argentina has entered into settlement agreements, and thus potentially end litigation that has raged for well over a decade.