Appeal’s court could also decide on contempt of court ruling Tuesday, March 31, 2015 Interest payment on Argentine-law bonds due today

Appeal’s court could also decide on contempt of court ruling

Tuesday, March 31, 2015

Interest payment on Argentine-law bonds due today

Argentina faces today an interest payment on its restructured debt for US$37 million, an operation that had been largely blocked by New York District Judge Thomas Griesa, but which was then expanded to Argentine-law bonds.

Days ago, Griesa authorized the minority of bonds issued under local law to see their payments processed by Citibank Argentina in the next two installments after the bank made a deal with him and the so-called “vulture funds,” but other financial entities acting as middlemen such as Euroclear remain blocked from distributing the cash, so the final destiny of the payment is still up in the air.

The Judge could authorize Euroclear to exceptionally process Argentine payments this time, or the funds could be blocked, risking to turn what some international observers have ruled as a technical default into a bigger one.

Only US$3.7 million of that money were expected to be processed by Citibank today, but the conflict meant more than just the amount of cash involved, as Argentina saw its sovereignty under attack after the bank prioritized Griesa’s orders in New York to local laws.

The CNV securities regulator temporarily suspended Citibank Argentina on Friday from conducting capital market operations, a measure that does not affect its continued presence as a retail bank.

At the same time, Caja de Valores, the country’s central securities depository, was appointed to administer Citibank’s accounts and process the corresponding debt payments.

“The deal allows Citibank Argentina to process interest payments, due to expire on March 31 and June 30. But the agreement only applies to Citibank. That means it leaves all other entities that take part in the bond payment process without any protection,” the CNV said at the time. “It also shows Citibank’s intent to leave its custody business in Argentina, creating uncertainties among bondholders. A future custodian wouldn’t be able to process payments as the deal only applies to Citibank.”

APPEALS COURT

A decision from the New York Court of Appeals on Griesa’s contempt of court ruling against Argentina is also expected today.

So far, that ruling has had no practical consequences against the country, but some analysts fear it could be used to issue further sanctions against the country, or the international institutions doing business with it.

Herald staff with DyN