If a Hedge Fund Holder of Defaulted Sovereign Debt Obtains a Judgment Against the Defaulting Sovereign, What Assets Can the Hedge Fund Go After to Satisfy the Judgment?

On May 25, 2011, the United States District Court for the Central District of California denied an ex parte motion of hedge fund NML Capital, Ltd. to place a temporary lien on and prevent the imminent launch of the United States-based Aquarius/SAC-D (Scientific Applications) Satellite.  The Aquarius Satellite represented a collaborative effort between the United States, the Republic of Argentina and other nations.  NML Capital, as holder of previously-suspended Argentina bonds, had sought to utilize a sovereign immunity exception in the Foreign State Immunities Act (FSIA) to execute its billion dollar judgment against Argentina by attaching its interest to Argentina’s part of the Aquarius Satellite.  The District Court rejected the hedge fund’s attempt to impose a temporary protective order or temporary restraining order on that satellite.  We discuss the background of the action and the District Court’s legal analysis as it relates to the rights of hedge funds that hold defaulted sovereign debt to attach and execute their interests against property of the sovereign debtor held in the United States.

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