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Aerolineas Argentinas

Judge: Aerolineas Argentinas to remain property of Argentina

Aug 20, 2009

The Republic of Argentina won’t be forced to give up control of assets of the state-run Aerolineas Argentinas as requested by bondholders with a $2.2 billion judgment against the country, a U.S. judge ruled.

The request was made last month by a group of noteholders in New York in a class-action, or group, lawsuit against Argentina. They alleged in a 2004 complaint that the country broke its contract by failing to pay interest or principal on republic notes. The plaintiffs are seeking to collect damages they’re owed, plus interest, by seizing the airline.

U.S. District Judge Thomas Griesa in Manhattan denied the request yesterday, saying there’s not enough evidence that the airline is the “alter ego” of the republic.

“The republic’s near-100 percent ownership of Aerolineas stock does not, on its own, support an alter-ego finding,” Griesa wrote in a six-page ruling. “There is no evidence that the republic has manifested any evidence for Aerolineas to act as its agent.”

In a separate ruling yesterday, Griesa denied a request by NML Capital Ltd. to seize assets of Energies Argentina SA, the Argentine state energy company, in a separate lawsuit.

Argentina defaulted on $95 billion in debt in late 2001, the biggest default in history. In 2005, then-President Nestor Kirchner offered holders of defaulted debt 30 cents on the dollar. Holders of about $20 billion in bonds rejected that deal.

No New Talks

Argentina has since refused to reopen negotiations, preventing the country from being able to directly tap international credit markets.

Individual bondholders in separate U.S. cases previously won a court order from Griesa that Argentine pension funds nationalized by the government and held in the U.S. may be used to satisfy judgments against the republic. Argentina has appealed.

In the Aerolineas case, Griesa said that since Argentina is “pouring money” into the airline, the situation is “the opposite of the typical alter-ego relationship, where a sham entity is left underfunded by its principals.”

The case is Seijas v. Argentina 04-cv-400, U.S. District Court, Southern District of New York (Manhattan).

Judge: Aerolineas Argentinas to remain property of Argentina
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