JPMorgan has won its court case against a U.S. hedge fund and therefore does not have to pay out on three credit-default swap contracts referenced to Argentina. Eternity Global Master Fund was claiming JPMorgan had committed fraud, negligent misrepresentation and breach of contract, according to court papers obtained by DW. "This is helpful in giving a legal interpretation to the definitions," said Simon Firth, partner at Linklaters in London. "This would also be a persuasive authority in English law," he added.
The most interesting point about this case is the question of what constitutes an Obligation Exchange, according to lawyers. In this case, bondholders were asked to exchange their obligations for lower-interest secured loans. Eternity argued Argentina's offer was "economically coercive," and was therefore mandatory. Judge Lawrence McKenna of the U.S. District Court of the Southern District of New York, disagreed in his report.
Because a voluntary debt exchange cannot fall within the definition of an Obligation Exchange, and as none of the other triggers of a restructuring credit event came into play, there was no relevant credit event, according to Patrick Clancy, attorney at Shearman & Sterling in London.
In the summary, the judge made it clear he did not want Eternity to appeal. He quoted Judge Koeltl saying, "[t]hree bites at the apple is enough."
