Wednesday, February 18, 2015

Argentina pressures Griesa on Citibank cash

A Citibank branch is pictured in Chicago, United States.

Agrees to meet ‘me-too’ holdouts next month to obtain full scope of demands

The federal government yesterday called on US District Judge Thomas Griesa to issue a definitive order that would authorize Citibank to process payments on dollar-denominated, Argentine-law bonds, instead of issuing permissions each time an interest payment is due as has happened so far.

Argentina told Griesa it has agreed to a meeting on March 17 with the so-called “me-too” bondholders — those who did not accept the terms of the 2005 and 2010 restructuring but who have not taken legal action against the country and are thus not covered by Griesa’s ruling — and set March 2 as the deadline for them to issue all of their demands.

The new developments in the case came only days after a UK court said interest payments on euro-denominated Argentine government bonds were governed by English law, without solving yet the conflict over the US$257 million held by trustee Bank of New York Mellon that are still to be distributed to the bondholders.

Flurry of memorandums

Argentina’s lawyers at Cleary Gottlieb Steen & Hamilton firm sent Griesa a memorandum, followed by another one sent by Citibank’s Head of Citi Treasury and Trade Solutions Federico Elewaut, supporting the country’s claim. On the other side, Charles Enloe, counsel for the “vulture” funds, sent a memorandum in opposition to modifying the injunction.

Back in December, Griesa called off a hearing scheduled for arguments on whether the bank could regularly process payments Argentina makes on the bonds and deferred hearings until 2015. As there still isn’t a date for the hearing, the federal government and the holdouts have sought to put pressure on the judge with new memorandums on the issue.

Argentina explained in its writ that the injunctions issued by Griesa to enforce the pari passu clause only prevent the country from making payments on exchange bonds through the Bank of New York Mellon (BNYM), unless the full debt is also paid. But the same doesn’t apply to Argentine-law bonds, which were never addressed by the injunctions, due to their domestic nature.

“The amended injunctions specifically prevent the Republic from making any scheduled interest payments on Exchange bonds payable to the BNYM, unless the Republic pays plaintiffs full principal and interest on their defaulted debt,” said the lawyer representing Argentina.“The proceeding that led to the amended injunctions never addressed the Argentine law bonds.”

Griesa has consistently only allowed the honouring of commitments to bondholders under Argentine legislation on a “one-time basis,” since the country’s dispute with “vulture” funds saw an interruption in payments at the end of July, 2014. The last one was in November when he authorized Citibank to process an expected US$85 million interest payment by Argentina on restructured bonds issued under local laws.

Nevertheless, Griesa has indicated that the arrangement won’t last long. In October 2014, after authorizing another one-time payment under Argentine law, Griesa stated that “further processes must proceed very promptly,” because “we do not want to be back here over and over when interest payments are due,” which might mean that the 2015 hearings will be used to decide the final outcome of the dispute.

“The Argentine Law bonds possess unique characteristics that further confirm their domestic nature. Unlike the Exchange Bonds payable to the Bank of New York Mellon (BNYM) and subject to the injunctions, they were not submitted to the jurisdiction of foreign courts, include a prefix that indicate their local Argentine issuance and don’t contain pari passu clauses,” the government said.

Citibank support

The federal government’s memorandum was sent to Griesa alongside another one written by Citibank’s Head of Citi Treasury and Trade Solutions Federico Elewaut, asking Griesa to authorize Citibank to process payments on dollar-denominated, Argentine law bonds

“I make this declaration in support of Citibank’s further opposition to injunctive relief against payment by Citibank Argentina,” Elewaut said.

Meanwhile, Charles Enloe, associate at the law firm Friedman Kaplan Seiler & Adelman and counsel to the holdouts, sent a memorandum to put on file for the court 114 documents related to Citibank’s motion seeking modification of Griesa’s ruling. The documents include transcripts of hearings, debt prospectus, Argentina’s decrees and laws, among others

Herald staff