Restructuring Sovereign Debt after NML v. Argentina

Capital Markets Law Journal (Forthcoming)

18 Pages Posted: 9 Aug 2016 Last revised: 30 Jan 2017

See all articles by Lee C. Buchheit

Lee C. Buchheit

Center for Contract and Economic Organization

G. Mitu Gulati

Duke University School of Law

Date Written: January 28, 2017


The decade and a half of litigation that followed Argentina’s sovereign bond default in 2001 ended with a great disturbance in the Force. A new creditor weapon had been uncloaked: The prospect of a court injunction requiring the sovereign borrower to pay those creditors that decline to participate in a debt restructuring ratably with any payments made to those creditors that do provide the country with debt relief. For the first time holdouts succeeded in fashioning a weapon that could be used to injure their erstwhile fellow bondholders, not just the sovereign issuer. Is the availability of this new weapon limited to the aggravated facts of the Argentine default or has it now moved permanently into the creditors’ arsenal? Only time (and future judicial decisions) will tell. In the meantime, however, sovereigns will occasionally find themselves in financial distress and their debts will occasionally need to be restructured. Venezuela already casts this chilly shadow over the sovereign debt market. If, in a galaxy not too far away, sovereign debt workouts are to have any chance of an orderly completion, a method must be found to neutralize this new weapon. Judging by the secondary market prices of different series of Venezuelan sovereign bonds, large amounts of money are being wagered that it cannot be done.

Keywords: sovereign debt, restructuring, NML v. Argentina, pari passu

JEL Classification: F34, F33, G15, H63, H87

Suggested Citation

Buchheit, Lee C. and Gulati, Gaurang Mitu, Restructuring Sovereign Debt after NML v. Argentina (January 28, 2017). Capital Markets Law Journal (Forthcoming) , Available at SSRN:

Lee C. Buchheit

Center for Contract and Economic Organization ( email )

New York, NY

Gaurang Mitu Gulati (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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