Citigroup Says Court Order Will Let It Pay Argentine Bond Interest
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Version 0 of 1. There is a new twist in the fight between Argentina and a group of hedge funds that has been playing out in New York courts. A United States federal court has allowed Citigroup to make interest payments to investors holding $2.3 billion of Argentine bonds due at the end of the month, the bank said on Sunday in a statement. Citigroup also said that it had been authorized to make another interest payment on June 30. The move, outlined in an order that is expected to be filed in court on Monday, appeared to be a reversal by Judge Thomas P. Griesa of the Federal District Court in Manhattan. As recently as March 12, Judge Griesa rejected an appeal by Citigroup to make the March 31 interest payments. The legal back and forth in recent weeks is part of a bigger, bitter battle that traces back to 2001, when Argentina defaulted on nearly $100 billion of government bonds. Most of the investors holding those defaulted bonds exchanged them later for new and discounted bonds. One small group of hedge funds chose not to. The hedge funds, led by Paul E. Singer’s NML Capital, instead took Argentina to court in New York, seeking full repayment on their bonds. In a turn that culminated with a second Argentine default last summer, Judge Griesa barred the banks that are processing interest payments for Argentine bonds from making any further interest payments unless they also paid the so-called holdout hedge funds in full. But in September, Judge Griesa appeared to soften his stance by allowing one of the banks, Citigroup, to make a one-time $5 million payment to a group of investors holding bonds issued under Argentine law. That ruling lifted hopes that it would clear the way for more leniency from the court in the future. Those hopes were dashed a week ago when Judge Griesa rejected Citigroup’s request to lift an injunction that prevented it from making the March 31 interest payment. His decision set in motion plans by Citigroup to close its custody business in Argentina, citing “unprecedented international conflict of laws.” Citigroup’s lawyers argued that the bank faced “grave sanctions” from Argentina and could stand to lose its banking license in Argentina if it were not allowed to make interest payments on Argentine bonds. Argentine officials have remained defiant. “We will make sure that Argentine banks comply with Argentine legislation because that’s the way it is the world over,” President Cristina Fernández de Kirchner said in a speech on Friday. A spokesman for NML Capital said Judge Griesa’s latest order followed negotiations between NML Capital and Citigroup: “Judge Griesa approved this agreement, which applies only to Citibank and was specifically tailored to address the unique circumstances facing Citi Argentina after Citibank announced it was exiting the custody business in Argentina.” |