Manhattan Court Dismisses Hedge Funds' Lawsuits Over Argentina GDP Payments

A federal court in Manhattan has dismissed lawsuits filed by Aurelius Capital Management and other hedge funds, which sought payments on securities tied to Argentina's economic performance, as reported by Bloomberg.

The ruling, issued on Monday, rejected Aurelius' 2019 lawsuit, which claimed entitlement to payments linked to gross domestic product (GDP) warrants issued during Argentina’s sovereign debt restructurings in 2005 and 2010. Other hedge funds had made similar claims, but all were dismissed under the court’s decision.

US District Judge Loretta Preska explained that the lawsuits were barred by a "no-action clause" in the bond agreement. This clause required investors to meet several preconditions before taking legal action, including obtaining written consent from at least 25% of bondholders to request action from the bond trustee. Since the hedge funds failed to meet these requirements, the judge ruled they were unable to pursue their cases.

The securities in question were part of Argentina's restructuring efforts following the country's $100 billion debt default in 2001. The hedge funds argued that they were entitled to additional payments when Argentina’s GDP increased by at least 3%. Specifically, they sought a payment for 2013. However, in 2014, Argentina revised its GDP calculation methodology and concluded that no payment was due for that year, as reflected in court documents.