Opinion ID: 2616
Heading Depth: 1
Heading Rank: 2

Heading: Telecom's Liquidity Crisis

Text: The confluence of these events triggered a liquidity crisis for Telecom, which held approximately US$ 3.3 billion in outstanding unsecured debt (Old Debt). On April 2, 2002, after consulting with its financial advisors, Telecom publicly informed investors that it would suspend principal payments on all of its Old Debt. See id. Telecom announced the suspension of its interest payments on the Old Debt shortly thereafter, on June 24, 2002. From approximately June 2002 through January 2004, Telecom negotiated with its creditors through an ad hoc committee in an attempt to restructure the Old Debt by consent, but failed to finalize a mutually acceptable proposal. On January 9, 2004, Telecom announced its own restructuring proposal and its intention to conduct the restructuring as an acuerdo preventivo extrajudicial (APE) under Argentina's Insolvency Law. See Insolvency and Bankruptcy Law No. 24.522 (public translation) (Insolvency Law). The laws governing an APE were revised in 2002, largely in response to the Argentine economic crisis. [1] As revised, the APE permits a debtor that suspends its payments or has financial difficulties to seek court approval of a privately negotiated, majority-approved restructuring plan and thereby make the plan binding on all creditors. Insolvency Law arts. 69, 72. Over the next several months, in consultation with its creditors, Telecom made several amendments to the proposed APE plan and finalized its solicitation statement seeking creditor consent. The final proposal provided creditors with three options: [2]  Option A: New Notes due 2014 (the Series A notes ), to be issued in an amount equal to the principal face amount of the outstanding notes, plus an adjustment for a portion of the unpaid interest; or  Option B: New Notes due 2011 (the Series B notes ), which were to have a shorter maturity and higher interest rate, but which were to be issued at a discount of approximately 5.5% to the principal face amount and adjustment for a portion of the unpaid interest. (Creditors selecting Option B agreed to have up to 37.5% of their debt allocated into the cash option described below.); or  Option C: A cash payment in equivalent U.S. dollars at a price not greater than 850 nor less than 740, to be determined pursuant to a Modified Dutch Auction. [3] At the expiration of the APE solicitation period, Telecom announced that it had received the consent of the holders of 94.4% in principal face amount of the outstanding notes, or 82.2% of the number of noteholders.