Today the Court of Appeals for the Second Circuit issued a decision affirming District and Bankruptcy Court decisions granting a petition by the board of directors of Telecom Argentina under former Section 304 of the Bankruptcy Code. In the face of a national economic crisis in Argentina, Telecom Argentina had commenced reorganization of its US$3.3 billion of unsecured financial debt, some of which was registered in the US. Telecom Argentina ultimately filed an acuerdo preventivo extrajudicial, or APE, insolvency proceeding in Argentina that resulted in approval of a reorganization plan that addressed all of its unsecured financial debt and was approved by most of its holders. However, one holder contended that it was entitled to payment in full of debt registered in the US. Telecom Argentina commenced a proceeding under Section 304 seeking enforcement in the US of its APE plan. Recognition of the plan was granted after a trial in the Bankruptcy Court. The Bankruptcy Court’s decision that the APE proceeding was fair and entitled to recognition as a matter of comity was affirmed by the District Court, and ultimately by the Second Circuit. The Second Circuit firmly rejected the claim that the US Trust Indenture Act requires payment in full to holders of debt registered in the US.

Telecom Argentina is the fixed-line operator of local and long-distance services in northern and southern Argentina.

The Davis Polk litigation team, for both the trial and the appeal, included partner Karen E. Wagner and associate Jordan Leigh Smith, both from the New York office. Partner Julia K. Cowles of the Menlo Park office handled Telecom Argentina’s complex corporate reorganization.

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