U.S. Judge Loretta Preska partially granted Argentina’s motion to not post a US$16.1 billion bond until the YPF expropriation case is settled on appeal. However, the judge ordered Argentina to pledge “alternative assets” as collateral to the Burford Capital fund, which won the lawsuit against the country — namely, its equity interest in YPF and Paraguay’s upcoming payments for the Yacyretá dam.

“The Republic shall do so by no later than December 5,” Preska’s 11-page memorandum said. “Enforcement of the final judgment is stayed until December 5, 2023, subject to a further stay upon completion of the pledges ordered herein.”

If Argentina fails to make such a payment, Preska would not grant the stay but the country would not be in contempt of court as a result.

“It is neither good nor bad for Argentina, it simply bought it a little time,” Juan José Carbajales, head of the energy consultant firm Paspartú, told the Herald. Carbajales added that the legal process will continue “for several years.” 

“[The lawsuit] is strictly against Argentina and not against YPF, although the complainants are trying to reinstate it as a co-defendant, as a sort of alter ego of the National State,” Carbajales said.

In 2012, through its Congress, Argentina expropriated shares of oil and gas company YPF held by the Spanish multinational Repsol, at the time the majority shareholder. Three years later, Burford Capital bought the trial rights from two companies belonging to the Argentine Eskenazi family, Petersen Energia Inversora and Petersen Energía, and another company, Eton Park. They considered that Argentina failed to make a tender offer for their YPF shares in 2012, and Preska ruled in their favor in September.

Weeks after winning the lawsuit against the country, the Burford Capital fund asked Preska to put Argentine assets as collateral on October 15. Argentina appealed, saying that the country does not have the financial resources to post a bond and pledging any amount would be “impossible,” “unreasonable” and would impose “serious hardship” on the Argentine people.

While Preska waived the full amount (US$16.1 billion) until after the appeal is settled, she said that Argentina should “protect the plaintiffs’ interests to some degree.”  The appeal process would finish once the Appeals Court, and eventually, the Supreme Court, decide on Argentina’s situation.

Preska said that the Court was “unpersuaded” by Argentina’s clamors over the amount due in her last ruling and rejected its stance that securing a bond through any means would be impossible.

“It would offend, not serve, equity to allow the Republic knowingly to violate the bylaws, force Plaintiffs to be its involuntary creditors for a massive amount over the course of a decade, and then pay a reduced rate by crying poverty when the bill comes due,” she wrote.

Burford had proposed various methods for Argentina to post a bond, even pointing to the national pension fund. However, Preska rejected that possibility, quoting Argentina’s lawyer Robert J. Giuffra who argued that that fund should only be used to pay benefits of the Argentine Integrated Pension System.

But Preska said that the country’s 51% equity stake, which is valued between US$2.35 billion and US$3.05 billion, shall be pledged to secure Argentina’s debt. This would not include the 49% earmarked for certain provinces. 

Preska’s order comes after president-elect Javier Milei pledged to privatize YPF. As per Article 10 of 2012’s expropriation law, transferring the state-owned YPF’s shares would require approval by a two-thirds majority in Congress.

“The president-elect announced his intention to privatize YPF, but said that first he would ‘reorganize it and make it recover its value’,” said Carbajales. “That is related to its stock price in the New York and Buenos Aires stock exchanges, and one of the factors that influence that current low is this lawsuit.”

In addition to the YPF shares, Preska also pointed to the US$4 billion in future receivables which Paraguay has committed to pay Argentina over the course of 30 years for the construction of the Yacyretá bilateral power generator dam. Burford had identified those future receivables in a prior request to seize the country’s assets and on Tuesday Preska suggested the country securitize that and use it as collateral.

If Argentina fails to post a collateral it wouldn’t be in contempt of court — it would just mean that Preska wouldn’t put a stay on the lawsuit’s enforcement until the appeal is affirmed. That would mean that Burford could seek to seize assets until the appeal is settled, but Argentina doesn’t possess many seizable assets abroad.

“Indeed, the years-long history of this litigation and the Republic’s actions in resisting payment suggest that Plaintiffs have a long road ahead,” Preska said.