Join the conversation:

Citibank Set Free to Hand Over Argentina’s Debt Payments

Citibank Set Free to Hand Over Argentina’s Debt Payments

Posted by Juan Gavasa on November 18, 2014

On Monday, New York Judge Thomas Griesa authorized Citibank to process payments amounting to US$85 million in Argentinean government bonds. Faced with growing pressure from the Argentinean government, this is the third time that the bank has appealed to the court to distribute bond payments owed by the South American country.

“In the last two quarters, this court has allowed Citibank Argentina to make ‘one-time’ payments to clients who were bondholders under Argentinean law. But in each instance, it was only allowed when the franchise and its employees were confronted with the prospect of serious damage,” the bank communicated in a statement.

Citibank is responsible for processing payments on maturing bonds issued under Argentinean law. The recent ruling indicates that the bank will have to request authorization from Griesa every three months in order to continue issuing the payments in question.

In June, Griesa denied Bank of New York Mellon’s request to process a payment for US$539 million, which the Argentinean government had already deposited for its restructured creditors. At that time, Griesa argued that the holdouts — those who declined the restructured debt deal in 2005 and 2010 — should receive the same treatment as the restructured creditors.

Subsequently, the Argentinean government refused to negotiate with the so-called vulture funds, citing the Rights Upon Future Offers clause, which prohibits the government from offering holdouts a better deal than the one the bondholders of its restructured debt previously accepted. When the payment grace period ended in July, Argentina promptly fell back into default.

Between a Rock and a Hard Place

Citibank finds itself under a great deal of pressure from the Argentinean government to issue bond payments. If Griesa had denied Citibank’s request to issue payments, the bank would have been forced to either further anger the Argentinean government, or recognize the court’s decision. The bank decided to seek authorization from the New York court to release the payments.

Monday’s ruling marks the third time that Griesa has granted Citibank authorization to issue payments for matured Argentinean government bonds.

In September, lawyer Karen Wagner asked judge Griesa to overturn bond payment restrictions on Citibank, which faced legal threats from the Argentinean government as well as the potential loss of its Argentinean business license.

In June, the United States Supreme Court rejected an appeal filed by the Argentinean government against the hedge funds, solidifying Griesa’s ruling that Argentina must pay roughly US$1.6 billion to bondholders who chose not to accept the restructured debt deal in 2005 and 2010.

Following the recent ruling, Griesa decided to postpone the next Citibank hearings until further notice. The hearings, which were scheduled for December 9, will attempt to secure further authorization for Citibank to pay creditors.

The Argentinean Government Reacts

“In a new demonstration of inconsistency, Judge Griesa has once again failed to answer the fundamental question and instead authorized Citibank to pay maturities to bondholders under Argentinean law in December for the third and only time,” said the Argentinean Ministry of Economy in a statement.

Chief of the Cabinet of Ministers Jorge Capitanich echoed the sentiment during a press conference: “He always does what the vulture funds ask. [Griesa's decisions] only add confusion and insecurity to the situation.”

Link To Full Article: 

Facebook comments

Monthly newsletter featuring articles hand picked by our country managers from the best content across PanamericanWorld.

Monthly newsletter featuring articles hand picked by our country managers from the best content across the Caribbean Region on PanamericanWorld.