Clearstream, one of the largest financial services companies in the world, recognized in its letter to the court that it has held on to payments to creditors while it awaits guidance.

Wednesday, July 9, 2014

Bank, bondholder letters to Griesa pile up

Court-appointed mediator Daniel Pollack will meet again with government authorities on Friday.

Luxembourg firm requests clarification from New York judge on reach of ruling

Luxembourg-based Clearstream Banking, a subsidiary of Deutsche Börse joined European holders of restructured Argentine debt in demanding that Judge Thomas Griesa clarify that his ruling for the country to simultaneously pay such creditors and holdouts has no jurisdiction over euro-denominated obligations and European payment channels.

Meanwhile, the government confirmed yesterday it will meet on Friday with mediator Daniel Pollack for a second time this week over the dispute with holdout creditors, who won’t be part of the meeting after accusing the government on Monday that it isn’t “willing” to negotiate, sources told the Herald.

Clearstream, one of the largest financial services companies in the world, recognized in its letter to the court that it has held on to payments to creditors while it awaits guidance.

Citibank, another of the government’s trustees, reportedly asked Griesa at a June 27 hearing if it was allowed to make such payments, to which the judge responded affirmatively, but the banks argue that written clarification is required.

A clarification note “must be conceded, and clarification is required on whether the order amended on February 23, 2012, prohibits payments,” said John Vassos, a lawyer at Morgan Lewis representing Clearstream.

The news comes only days after it was revealed that restructured European bondholders had filed a case in Belgian courts last week against Euroclear and the Bank of New York (BONY) over their failure to pay out Argentina’s deposit for restructured bondholders.

Prior to the claim, drafted by Latham & Watkins, a law firm representing the investors, the same group had sent a letter to Griesa requesting clarification on the situation after Euroclear and BONY had frozen payments.

“Lacking jurisdiction over those foreign entities (European banks through which Argentina pays bondholders), this Court should now clarify that they are not subject to the injunctions either directly or by operation,” read the motion drafted by Latham & Watkins.

Euroclear has also reportedly asked for Griesa to explain the reach of his ruling, but thus far no responses to any of the parties from his New York court have been divulged.

Argentina published a notice in several newspapers on Monday affirming it had met its obligations to such creditors by depositing the funds in Euroclear and BONY accounts.

BONY Mellon had no comment on the legal notices from the government. A source with direct knowledge of the situation said the bank will file a motion to Judge Griesa on Thursday seeking guidance on what it should do with the money.

Other holdout investors with at least US$6 billion worth of unrestructured Argentine debt have started organizing negotiating committees, encouraged by Buenos Aires’ stated desire to settle with 100 percent of its creditors.

Second round with Pollack

Government authorities will meet on Friday with Pollack for a second time this week over the dispute with holdout investors, with Economy Minister Axel Kicillof confirming he will lead the delegation again.

At the first meeting, Kicillof insisted on the need for a stay to shield the country from having to default, with the minsiter describing the encoutner as “an important first step.”

“The special master said it was a complex issue and has to revise it before meeting again on Friday,” Cabinet Chief Jorge Capitanich said at his daily morning news conference yesterday.

Sources close to the holdouts confirmed to the Herald that they won’t be part of the Friday meeting since talks are “private” between Kicillof and Pollack, and added that Argentina hasn’t contacted them to begin negotiations.

Kicillof met on Monday with “special master” Daniel Pollack as a first step of the negotiation and told him that the US District Judge Thomas Griesa’s ruling against the country is “impossible” to fulfill and that a stay is necessary in order to reach a solution for all creditors.

The government has until July 30 to reach an agreement with hedge funds who refused to participate in the country’s earlier debt restructuring and have been suing for full repayment of sovereign bonds which Argentina defaulted on in 2002.

Herald with Télam, Reuters