NEW YORK - A US Federal Court in New York has ruled that Citibank would not be allowed to transfer future payments on local law Discount and Par bonds issued in the 2005 and 2010 exchanges Argentina made for its defaulted debt.
Federal District Court Judge Thomas Griesa, who has overseen the myriad of lawsuits against Argentina in the wake of its 2001 default for over a decade, denied Citibank’s request to vacate a 28 July order that prohibited Citibank from processing payments on those bonds.
Griesa rejected Citibank’s arguments that these bonds are not subject to the pari passu injunction because they were not “external indebtedness” and that Citibank is not a participant in the payment process.
The affected bonds have the following ISINs: ARARGE03E097, ARARGE03E113, ARARGE03E154, ARARGE03G688, and ARARGE03G704. There are about $8.4 billion of these bonds outstanding -- about 22% of exchange bonds.
Payments on other local law bonds, such as Bodens and Bonars, are not directly affected by this ruling.
The interest payment on the affected bonds was due to be paid March 31.
Local press reports have indicated that Argentina will try to bypass the U.S. ruling and Citibank by getting the interest payments to Euroclear directly from a Caja de Valores bond depositary in Buenos Aires.
However, Euroclear is also subject to the pari passu injunction in the U.S., although in Europe where it is based, its enabling legislation exempts it from being subject to such injunctions.
Citibank has appealed the 28 July order which was upheld today to the U.S. Second Circuit Court of Appeals, but that appeal was denied on procedural grounds. Argentina's lawyers said that they would pursue other appellate options.
NML v Argentina - Citibank - Griesa Opinion Denying Citibank Argentina Request to Pay - 12 March 2015 by Latin American Herald Tribune
NML v Argentina - Citibank - Citibank Letter to Argentina CNV - 12 March 2015 by Latin American Herald Tribune