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The Influence of US Courts on Argentine Debt Restructuring and Future Creditor Rights

This paper explores the impact of US courts on the recent restructuring of Argentine debt, analyzing how judicial influence may affect creditor rights in the future. It discusses the role of holdout litigation in stimulating settlements, the implications of judicial activism in debt restructuring, and the potential of collective action clauses (CACs) in ensuring effective engagement among creditors. The study draws on recent sovereign settlements and advocates for a judicial framework that supports the restructuring process through creditor committees and codes of conduct.

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The Influence of US Courts on Argentine Debt Restructuring and Future Creditor Rights

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  1. Transition to CACs: The Judge, the vultures and the future of creditor rightsMarcus Miller University of Warwick , CSGR Dania Thomas Keele University, CSGR October 2006

  2. Questions • To what extent did the US courts influence recent Argentine debt restructuring? • How will judicial influence impact creditor rights in the future?

  3. Comparison of Recent Sovereign Settlements(Porzecanski, 2005) Adjusted for purchasing power , latest (2003) data for Argentina, otherwise data corresponds to year(s) of debt restructuring as noted Source: IIF,IMF, World Bank, A.C.Porzecanski’s calculations

  4. The Argentine debt resolution: overlapping influences

  5. Argentine litigation • Engages the holdouts long enough to stimulate the settlement • Then reins them in to ensure the settlement

  6. Judicial activism

  7. Judge-mediated debt restructuring

  8. Conclusions It may be that, in theory, bonds with CACs can be restructured to ensure engagement and to secure aggregation: in practice it seems that the courts can do a great deal to help. This is why we look to a future with CACs and courts, aided by creditor committees and codes of conduct. Stiglitz (2006) makes a similar point when he argues: “The fact that every advanced country has found it necessary to have a bankruptcy law reinforces the conclusions of economic theory, that collective action clauses will not suffice; some judicial process is required”

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