Wednesday, March 4, 2015

Euro-bondholders pressure Griesa for ruling

The Economy Ministry says the judge’s decision to postpone a ruling shows he favours the “vultures.”

New York district judge postpones final decision on Citi bond payments

After obtaining a favourable ruling in London, investors who hold euro-denominated Argentine government bonds asked United States District Judge Thomas Griesa yesterday to “reconsider” his prior rulings and warned they are ready to “pursue any remedy available” to receive the 225 million euros (US$257 million) currently held by trustee Bank of New York Mellon (BoNY).

Meanwhile, Griesa chose yesterday to postpone a definite ruling on whether Citigroup can process interest payments of dollar-denominated, Argentine-law bonds after an almost three-hour hearing with lawyers representing Argentina, Citigroup and the holdout funds.

“We respectfully request that the court reconsider its prior rulings as they apply to the euro bonds. In the meantime, the euro bondholders, as fiduciaries, will continue to pursue any remedy available to them in connection with their property rights relating to those bonds in all appropriate forums,” Cristopher Clark, a lawyer representing euro bondholders at Latham & Watkins, told Griesa in a letter.

UK Justice David Richards said in February 14 interest payments on the debt were governed by English law but declined to order that the funds held by BoNY to be distributed to the bondholders. The decision throws the spotlight back on Griesa as the bank is subject to the jurisdiction of US law.

Richards concluded that his ruling was “peculiarly within the jurisdiction of the English Court” because it established “the status of the funds held by BoNY as a matter of English Law” and, in that regard, observed that the euro bonds “involve no connection at all with the United States” and are indisputably governed by English Law.

The euro-bondholders were waiting for BoNY to inform Griesa over Richard’s ruling but as that didn’t happen, they were “compelled” to do so themselves, Clark explained.

“BoNY took the position that as trustee it could be relied upon by the English Court to bring to Your Honour’s attention any rulings issued by the English Court. However, because BoNY has failed to take any steps to timely inform the Court of such rulings, the euro-bondholders are compelled to do so themselves,” he said.

After Griesa halted payments until a deal was reached between the holdout creditors and Argentina, a separate group of investment firms opened a case in London concerning the euro debt, saying the US court had no right to block payments which, it said, fell under English law.

Claimants in London included Quantum Partners, the fund run by George Soros, Knighthead Master Fund, RGY Investments, and Hayman Capital Master Fund. The London court case involves debt interest payments totalling 225 million euros (US$257 million) held by trustee Bank of New York Mellon, a defendant in the London case, after the money was transferred to the trustee by Argentina on June 26, 2014.

“We respectfully request the court to consider the guidance provided by the English Court in its judgment — the only court that has ruled on issues specific to the euro bonds, which are indisputably governed by English law and lack a nexus to the United Sates,” Clark asked Griesa.

New hearing

Griesa told the lawyers for Citigroup, Argentina and holdout investors in a hearing in New York that he would not issue a decision yesterday afternoon. The hearing marked the latest courtroom tussle over whether Griesa has authority to block Citigroup’s branch in Argentina from processing payments on bonds issued under the country’s local laws.

“The injunction does not just enjoin the republic, but also the participants in the bonds. The issue before me is to decide whether Citibank is a participant,” said Griesa.

The Economy Ministry criticized Griesa for not solving the issue after four hearings over the last eight months and said he “is still acting in favour of the ‘vulture’ funds.”

“In a new chapter of the ‘vulture’ funds strategy to blackmail Argentina, there was a new hearing in Griesa’s court where once more nothing was decided,” the Ministry said in a press release. “Argentina hopes Griesa will stop acting as an accomplice to the blackmail attempts of the ‘vulture’ funds and solve the legal discussion.”

Legal counsel for Citibank, Karen Wagner of Davis, Polk & Wardwell told Griesa that the injunction would put Citibank at risk of breaking Argentine law.

“There’s nothing to be gained from enforcing the injunction. There will be no benefit to the public and Citibank will be in danger. It seems fundamentally unfair and inequitable to put Citi in that position,” Wagner argued.

Edward Friedman, counsel for holdout bond investors, said the debt in question was offered not just to Argentine investors.

“Were these bonds offered exclusively in Argentina? And what the evidence shows is overwhelmingly they were not,” said Friedman, of Friedman Kaplan Seiler & Adelman. He said offers were made in countries include Denmark, Italy, Spain.

Argentina and Citibank sent letters to Griesa on Monday, saying that the bonds are not covered by the pari passu clause and because of that the payment should be authorized. The very existence of Citibank Argentina and it’s licence “are in jeopardy,” the bank said.

At the end of the hearing, Griesa noted the challenge before him of determining Citibank’s role in an environment where there was no “set of financial transactions in the regular way.

“So here we are, here I am as a judge, dealing with instruments and questions of how things would go in a regular way. But nothing is going in a regular way now. And that is a problem we will have to address,” Griesa said.

Herald with Reuters