Lawyers tell Griesa seeking information is not ‘true motivation’ of hedge funds
Deutsche Bank accused NML Capital and other “vulture” funds yesterday of harassing banks that participated in legal debt offerings made by Argentina, including through abusive demands for evidence, press leaks of confidential material and untrue statements to United States Judge Thomas Griesa.
In a letter sent to Griesa yesterday, lawyers for Deutsche Bank of the New York law firm Moses & Singer said the bank plans to ask the US judge to throw out a subpoena filed by NML, a unit of Paul Singer’s Elliott Management, Aurelius Capital and other holders of Argentine debt.
“(The) Plaintiffs’ true motivation is not (the) discovery of relevant information but harassment of financial intermediaries,” Phillippe Zimmerman, a lawyer for the bank, said in the letter to Griesa.
The hedge funds are seeking information from Deutsche Bank about US$1.4 billion worth in Bonar 2024 bonds issued by Argentina in April, denominated in US dollars but governed by Argentine law. Deutsche Bank’s Argentine branch made bids on those bonds for clients in London, according to the letter.
“(The) Plaintiffs haven’t demonstrated and cannot demonstrate a reasonable belief that this most recent discovery attempts will lead to relevant information pertaining to the Republic’s attachable assets,” Zimmerman said.
NML and other holdout funds want that sale to London clients to be considered by Griesa as external debt, an argument rejected by Argentina. NML told the Court that Deutsche Bank managed the bond sale and asked the US judge to include those bonds among the ones Argentina cannot pay until it pays the “vulture” funds.
“The subpoenas being issued by NML, Aurelius and other plaintiffs are less an effort to obtain information to locate and ultimately seize attachable assets of the Republic and more a tool under the auspices of the Court to punish entities and affiliates of the entitled that are identified as having played a role in financial transactions with the Republic,” the bank said in the letter.
Confidential information
Deutsche Bank warned about attempts by NML to “instigate press reports” with the objective of suggesting that such entities or their affiliates have acted illegally in being involved in such transactions with Argentina. At the same time, the bank accused the hedge funds of leaking information to the press which had been ordered to be kept confidential.
In a hearing with Griesa, NML lawyer Robert Cohen had said there were media reports identifying a Deutsche Bank entity as having subscribed US$1 billion of the Bonar 2024. Nevertheless, those media reports never existed. According to yesterday’s letter and despite Cohen’s statements, NML finally admitted during another meeting that no such reports existed.
“There were no media reports linking Deutsche Bank in New York with the Bonar 2024 auction. Cohen said there were media reports but NML has now confirmed that no such media reports exist,” the bank said in the letter. “Deutsche Bank renewed its request that NML and Aurelius correct their misstatements to the Court but NML and Aurelius refused to make corrections.”
At the same time, Deutsche Bank said it was aware of violations to the confidentiality orders by the plaintiffs and proved it by exposing the fund’s behaviour.
Zimmerman intentionally gave NML and Aurelius “imprecise” information about bids placed at the Bonar auction by the bank’s Argentine branch and, soon after the meeting, the information was being published by Argentine media outlets.
“Shortly after the incorrect information was made available exclusively to NML and Aurelius, Deutsche Bank became aware of media reports in the Argentine press referring to alleged bids,” the lawyer said in the letter. “Someone with access to the incorrect information provided by the bank to NML violated the confidentiality orders by leaking information to the media.”
A failed bid
In February, Argentina tried to use Deutsche Bank and JPMorgan as brokers in an ultimately failed bid to sell US$2 billion, which was cancelled after Judge Griesa issued a discovery order for copies of all the relevant documents regarding the bond sale. Although Griesa clarified that he was not forbidding Argentina’s bond issue at the time, that was enough for the parts to decide to call off the move for the moment.
Both banks had also sent a letter to potential investors interested in the bond sale, warning them about the risks of being part of it.
Two months after that, the country finally managed to issue debt through the Bonar 2024, with the Economy Ministry emphasizing that the transaction was carried out internally, with no banks hired as agents. Aurelius claimed yesterday that Banco Francés, and the Marathon and Fintech investment funds also helped Argentina. Still, even if foreign companies had some role in the bond issue, they have not been declared in violation of Griesa’s court orders.
NML is now asking Griesa to expand the reach of his interpretation of the pari passu (“equal treatment”) clause — which blocked repayments from the bonds Argentina restructured after its 2002 default — to all of the country’s bonds. Nevertheless, the US Judge has clarified in the past that he did not yet see a reason to declare any of Argentina’s new bond issues illegal.
Source: Buenos Aires Herald
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