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Argentina to pay bondholders despite U.S. court ruling

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Buenos Aires moved to pay bondholders domestically after a US bank left it unable to do so, President Cristina Kirchner said.

"To protect the payments to bondholders who took part in the 2005 and 2010 debt swaps, we are designating the (state) Banco Nacion Trust as a replacement for Bank of New York Mellon, however the bondholders decide (to take payment), voluntarily," Kirchner said in a televised address.

In July, US Judge Thomas Griesa ordered a freeze on some Argentine payments until Buenos Aires simultaneously pays off the hedge funds which sued the country to demand payment on their bonds.

Argentina placed $539 million into an account of Bank of New York Mellon at the Argentine central bank at the end of June to meet a scheduled payment to holders of the country's restructured bonds.

Argentina's defaults since 1827
Argentina's defaults since 1827
Paz Pizarro / cam, AFP

But Griesa forbade the bank from transferring the money to the bondholders, in line with his previous 2012 ruling.

Argentina, he said, must first comply with an order that hedge funds which did not join the bond restructuring program after the country's 2001 default be paid in full for the $1.3 billion in bonds they hold.

Argentina says the hedge funds gave up the chance for payment when they rejected the restructuring deal, which was accepted by 92 percent of the country's creditors.

But Griesa has repeatedly ruled in favor of the hedge funds, NML Capital and Aurelius Capital Management, and threatened to hold Bank of New York in contempt of court if it transfers the money.

He also forbade the bank from returning the money to the Argentine government.

Supporters of Argentine President Cristina Kirchner attend a protest against the so-called
Supporters of Argentine President Cristina Kirchner attend a protest against the so-called "vulture funds", at Luna Park stadium, in Buenos Aires on August 12, 2014
Leo la Valle, AFP/File

Holders of eurobonds and other non-dollar-denominated Argentine debt say the New York court does not have jurisdiction over their bonds, and that their payments should not be held up by the claims of the hedge funds.

Argentina and the hedge funds have sought to find a compromise, most recently exploring whether another group of investors, mainly banks, could buy the hedge funds' bonds to satisfy their claims.

But those talks went nowhere, leaving the parties at odds as the country -- already ruled in default by ratings agencies -- approaches new scheduled interest payments in coming months.

Buenos Aires moved to pay bondholders domestically after a US bank left it unable to do so, President Cristina Kirchner said.

“To protect the payments to bondholders who took part in the 2005 and 2010 debt swaps, we are designating the (state) Banco Nacion Trust as a replacement for Bank of New York Mellon, however the bondholders decide (to take payment), voluntarily,” Kirchner said in a televised address.

In July, US Judge Thomas Griesa ordered a freeze on some Argentine payments until Buenos Aires simultaneously pays off the hedge funds which sued the country to demand payment on their bonds.

Argentina placed $539 million into an account of Bank of New York Mellon at the Argentine central bank at the end of June to meet a scheduled payment to holders of the country’s restructured bonds.

Argentina's defaults since 1827

Argentina's defaults since 1827
Paz Pizarro / cam, AFP

But Griesa forbade the bank from transferring the money to the bondholders, in line with his previous 2012 ruling.

Argentina, he said, must first comply with an order that hedge funds which did not join the bond restructuring program after the country’s 2001 default be paid in full for the $1.3 billion in bonds they hold.

Argentina says the hedge funds gave up the chance for payment when they rejected the restructuring deal, which was accepted by 92 percent of the country’s creditors.

But Griesa has repeatedly ruled in favor of the hedge funds, NML Capital and Aurelius Capital Management, and threatened to hold Bank of New York in contempt of court if it transfers the money.

He also forbade the bank from returning the money to the Argentine government.

Supporters of Argentine President Cristina Kirchner attend a protest against the so-called

Supporters of Argentine President Cristina Kirchner attend a protest against the so-called “vulture funds”, at Luna Park stadium, in Buenos Aires on August 12, 2014
Leo la Valle, AFP/File

Holders of eurobonds and other non-dollar-denominated Argentine debt say the New York court does not have jurisdiction over their bonds, and that their payments should not be held up by the claims of the hedge funds.

Argentina and the hedge funds have sought to find a compromise, most recently exploring whether another group of investors, mainly banks, could buy the hedge funds’ bonds to satisfy their claims.

But those talks went nowhere, leaving the parties at odds as the country — already ruled in default by ratings agencies — approaches new scheduled interest payments in coming months.

AFP
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With 2,400 staff representing 100 different nationalities, AFP covers the world as a leading global news agency. AFP provides fast, comprehensive and verified coverage of the issues affecting our daily lives.

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