BNY Mellon sucked into center of Argentine debt storm
By Jorge A. Otaola and Nate Raymond
BUENOS AIRES/NEW YORK (Reuters) - Bank of New York Mellon found itself front and center of Argentina's debt battle on Tuesday after the South American country stripped its authorization to operate there and bondholders seeking payment filed a lawsuit against the U.S. bank.
BNY Mellon, a financial intermediary between the Argentine government and its bond investors, in June held onto a $539 million interest payment owed to bondholders on the orders of a U.S. court.
The U.S. District Court in New York had ruled that Argentina could not pay creditors who accepted discounted restructured bonds under U.S. legislation unless it also paid the holdout U.S. investment funds that rejected bond swaps in 2005 and 2010.
The frozen coupon payment tipped Latin America's No.3 economy into its second default in little over a decade. The Argentine government argued it had met its debt obligations and urged holders of exchange debt to pursue BNY Mellon for payment.
A lawsuit filed in London by four hedge funds said that BNY Mellon's actions "have been consistently designed to protect its own interests."
If the lawsuit - filed at London's High Court by hedge funds Knighthead Master Fund, RGY Investments LLC, George Soros's Quantum Partners and Hayman Capital Master Fund - is successful it may put pressure on U.S. District Judge Thomas Griesa, who has presided over Argentina's drawn-out debt battle with the holdouts, to exempt bonds that fall under jurisdictions outside the United States.
The plaintiffs, who hold Argentine debt amounting to 1.3 billion euros, argue their euro-denominated bonds fall under English legislation and therefore should not be swept up in Griesa's rulings.
Griesa has ruled the bonds should because interest payments made on them pass through New York and therefore fall under his jurisdiction. Continued...