Pari Passu, Blobs and Fortune Cookies

Pari passu.

When Argentina defaulted on its debts in 2001, some people sued to get their money, and won court judgments, which didn't help them that much. It's not like they could foreclose on Argentina. But some hedge funds -- led by NML Capital, a unit of Elliott Management Corp. -- sued under a different and cleverer theory. Argentina's defaulted bonds had a pari passu clause that said that the bonds would "at all times rank at least equally with all its other present and future unsecured and unsubordinated External Indebtedness." After the default, Argentina had done a restructuring in which it exchanged many of those bonds for new bonds, which it then serviced normally, while continuing to stiff holdout creditors who refused the restructuring and kept the old bonds. NML sued in U.S. courts, claiming that the pari passu clause banned Argentina from paying interest on the new exchange bonds without also paying off the old holdout bonds in full: By paying the exchange bonds and not paying the holdout bonds, Argentina was violating its promise that the old bonds would "rank at least equally" with the new ones.