Last updated: July 5, 2015 6:30 pm
Hedge funds are pursuing Deutsche Bank over its role in a bond issue by Argentina as the country’s smouldering dispute with holdouts over its 2001 default continues to entangle international lenders.
A group of funds, including NML Capital, a subsidiary of Paul Singer’s Elliott Management, and Aurelius Capital Management, filed a subpoena at a New York court two months ago after Argentina sold about $1.4bn so-called Bonar 2024 bonds in April.
The German lender has not yet fulfilled the request for information in the subpoena and declined to comment on the matter. Deutsche Bank Argentina was one of the institutions that placed orders for the bonds on behalf of third party investors, according to people familiar with the situation.
The wrangle is the latest in a long series of disputes stemming from Argentina’s $100bn default in 2001. More than 92 per cent of bondholders accepted haircuts on their investments as part of debt restructurings in 2005 and 2010. But a small group of hedge funds, led by NML and Aurelius, is fighting for full repayment.
Last year the US Supreme Court affirmed a ruling by a New York district court judge that Argentina could not service other foreign debts without paying holdouts at the same time, leading its government to ultimately opt to default rather than negotiate a settlement.
The holdouts have demanded that Deutsche provide documents clarifying its role in the auction as well as other earlier offerings of Bonar 2024s.
The subpoena asks for documents showing whether there had been any effort to structure offerings of Bonar 2024s in such a way that would “avoid attachment, execution, or other legal process in aid of judgment or pre-judgment enforcement initiated by creditors of Argentina, or any remedy or relief that creditors of Argentina may seek”.
The filing also asks for information on whether there was any discussion about how the offering was affected by “any applicable laws, rules, or regulations, including but not limited to laws, rules or regulations governing foreign currency exchanges or transfers of securities”.
An earlier attempt by Argentina to issue at least $2bn of US dollar bonds under local law fell apart in February after Judge Thomas Griesa ordered JPMorgan and Deutsche, the two banks involved in the sale, to hand over documents on the “flow of funds” relating to the issue.
With little prospect of Argentina agreeing to talk to holdouts before presidential elections in October, the funds have pursued their litigation on other fronts.
In May, Aurelius Capital asked Judge Griesa to rule that Bonar 2024 bonds were “external indebtedness”, which would place them under the Supreme Court ruling restrictions.