Before judge griesa

Saturday, October 11, 2014

Holdouts to seek contempt for Central Bank, Banco Nación

Some of Argentina’s holdout creditors are considering asking US District Judge Thomas Griesa to hold local state-owned lender Banco Nación and the country’s Central Bank in contempt as part of their fight against the country, according to a source familiar with the situation.

The request would be based on the role of the two institutions in helping Argentina circumvent the US jurisdiction in September by depositing a coupon payment due on its restructured bonds at an account opened by the Central Bank at Nación Fideicomisos, a subsidiary of Banco Nación instead of at trustee bank New York Mellon.

Both institutions could fall under the US court’s jurisdiction and be subject to monetary fines as Banco Nación has offices in the US and the Argentine Central Bank (BCRA) maintains an account at the Federal Reserve, the source said.

Griesa held Argentina in contempt of court last month for trying to find ways to circumvent a prior order requiring it pay holdout bondholders at the same time it pays creditors who accepted its 2005 and 2010 restructurings.

On September 30, Argentina deposited a US$161 million bond interest payment at Nación Fideicomisos defying Griesa’s order. The coupon payment is intended to show that Argentina has the ability to continue servicing its international debt despite Griesa’s embargo of previous debt payments to restructured bondholders but which excluded holdout creditors.

The September payment was made in accordance with the terms of a new Sovereign Debt Law passed by the Argentine Congress weeks before the coupon was due.

But this money may not reach the hands of investors because using Banco Nación as the conduit for payments violates the 2005 trust indenture which says that trustee has to have a place of business in New York, which the fiduciary does not.

If delivered to an institution that is not formally recognized as trustee, the payments could also be attached by the US courts.

— Herald staff with Reuters