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LATINBURG S.A. v. REPUBLIC OF ARGENTINA

United States District Court, S.D. New York


May 24, 2004.

LATINBURG S.A., Plaintiffs, -against- THE REPUBLIC OF ARGENTINA, Defendant

The opinion of the court was delivered by: THOMAS GRIESA, Senior District Judge

AMENDED OPINION

Introduction

Plaintiff Latinburg S.A., a corporation organized under the laws of Uruguay, with its principal place of business in Montevideo, ("Latinburg") is the owner of certain bonds issued by the defendant, The Republic of Argentina ("The Republic"). The Republic has defaulted on the bonds. Latinburg is suing to recover amounts due to it by virtue of the default and has moved for summary judgment.

  The Republic opposes the motion asserting various defenses. In addition the Republic moves to dismiss for failure to state a claim.

  Latinburg's motion for summary judgment on its bond obligations is granted. The Republic's motion is denied. Facts

  The Bonds

  Latinburg acquired certain bonds issued by The Republic of Argentina with principal amounts as follows:

(1) $342,000 in face value in 9 3/4% Bonds issued September 19, 1997, maturing on September 19, 2007, identified by ISIN US040114AV28, with interest paid semi-annually on March 19 and September 19;
(2) $500,000 in face value in Bonds issued June 19, 2001, maturing on December 19, 2008, identified by ISIN US040114GF14, bearing an interest rate of 7% to be paid semi-annually on June 19 and December 19, but excluding June 19, 2004, and bearing an interest rate of 15 1/2% thereafter; and,
(3) $595,000 in face value in 11 3/8% Bonds issued January 30, 1997, maturing on January 30, 2017, identified by ISIN US040114AR16, with interest paid semi-annually on January 30 and July 30.
  As proof of ownership Latinburg provides an affidavit by its President, Nelson Carlos Greca Peña, stating that Latinburg purchased the above listed bonds in the aggregate principal value of $1,437,000.00. Pe ñ a further states that the bonds are held in the name of Wachovia SECS LLC, RICH, c/o Prudential-Bache Securities (UK) Inc., 9 Devonshire Square, 4th floor, FC2M 4HP, London, United Kingdom ("Wachovia"), and allocated on its books to Latinburg.

  Latinburg has provided notarized statements from the depositary or nominee Euroclear, stating that the above listed bonds, in the above stated amounts, are being held on account for Wachovia in Euroclear Securities Clearance Account 92124, and that the bonds were blocked for the purpose of filing a claim. The statements also indicate, but do not verify, that Wachovia has allocated the above listed securities in the above amounts to Latinburg S.A., Rincon 531 of 502 Montevideo Uruguay, on its books.

  Latinburg has provided account statements from its account with Wachovia showing the above listed bonds, in the above stated amounts.

  The bonds are all governed by the same Fiscal Agency Agreement between The Republic of Argentina and Bankers Trust Company, dated October 19, 1994. This is the same FAA as the one governing the bonds concerning which this court granted summary judgment to the plaintiffs in Lightwater Corporation Ltd, v. The Republic of Argentina, Nos. 02 Civ. 3804, 3808, & 5832, 2003 WL 1878420 (S.D.N.Y. April 14, 2003). Section 22 of the FAA states that the Republic of Argentina 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 FAA provides 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 of a moratorium on the payment of principal or interest on its public external indebtedness is an event of default as well. Upon an event of default, a bondholder is entitled to give notice declaring the principal amount of the bonds held by it immediately due and payable.

  On December 24, 2001, the Republic declared a moratorium on payments of principal and interest on the external debt of the Republic. This moratorium is still in effect. The court refers to its previous opinions for a more complete description of the circumstances of the default. See, e.g., Lightwater, 2003 WL 1878420, at *2.

  Latinburg sent notices of acceleration to The Republic and has subsequently filed suit.

  The Republic moves to dismiss for lack of standing to sue under the contract governing the bonds. It claims that the plaintiffs are owners of beneficial interests rather than registered holders, and that the contract confers the right to sue on the registered holder exclusively, which is the depositary. Latinburg moves for summary judgment.

  Discussion

  In the Lightwater, Old Castle, Macrotecnic and EM Ltd, cases this court has already granted summary judgment to the plaintiff bondholders seeking to collect on Argentine bonds which went into default as a result of the December 24, 2001 moratorium. This court found that:

The obligations of the Republic on the bonds involved in these lawsuits are unconditional. Sovereign immunity has been waived. The Republic defaulted on the bonds when it ceased to pay the interest. This would seem to mean that the Republic now owes the three plaintiffs principal and accrued interest.
2003 WL 1878420 at *4.

  The court finds nothing in the record to distinguish Latinburg's case as to this court's jurisdiction and Latinburg's unconditional legal right to collect on the bonds.

  Latinburg provides affidavits and statements of account that give the court no reason to doubt that it is the beneficial owner of the bonds. Argentina has defaulted on the bonds by declaring a moratorium and failing to make interest payments. Latinburg was entitled, by notice, to declare the principal amount owed to it due and payable immediately under the terms and conditions of the certificates and the FAA. Latinburg has so notified Argentina's fiscal agent. The Republic has not provided evidence sufficient to raise doubt as to the validity of Latinburg's claim. Latinburg is therefore entitled to summary judgment.

  The Republic's argument to dismiss for lack of standing based on the language in this FAA has already been denied in a previous ruling by this court. See, Applestein & Kalberman v. The Republic of Argentina, 02 Civ. 4124, Transcript of Oral Argument on March 5, 2004, at 32:17 ("I am holding that the beneficial owners [of the Argentine bonds] have standing.").

  Conclusion

  Latinburg's motion for summary judgment is granted. Judgment will be entered for the principal amount of the bonds plus accrued interest. The motion by the Republic is denied.

  SO ORDERED.

20040524

© 1992-2004 VersusLaw Inc.



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