Citigroup seeks stay on Argentine debt order; government threatens penalties

Mon Sep 22, 2014 5:51pm EDT
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By Nate Raymond

NEW YORK (Reuters) - Citigroup Inc (C.N: Quote) plans to ask a U.S. judge to put on hold an order barring it from processing payments on $8.4 billion in bonds issued under Argentine law following the country's record 2002 default, court documents showed.

Citigroup says it faces regulatory and criminal sanctions by the South American country, which defaulted on some of its debt in July, if it cannot process the $5 million interest payment due to bondholders by Sept. 30.

Economy Minister Axel Kicillof on Monday threatened Citigroup with "penalties" if the bank failed to make the payment, as the government fights to prevent the debt crisis from spreading to other types of bonds.

A lawyer for the bank told U.S. District Judge Thomas Griesa of its plans during a hearing in New York on Friday just hours after a federal appeals court dismissed Citigroup's appeal of Griesa's injunction prohibiting payment.

"As your honor knows, we are facing a payment deadline of Sept. 30, so we are likely also to move for a stay," said Karen Wagner, a lawyer for Citigroup, according to the transcript obtained on Monday.

No other parties were present at last Friday's hearing with Griesa. Griesa has since scheduled a new hearing on the matter for Friday at 3:00 p.m. EDT (1900 GMT), a court official said on Monday.

Under the terms of a 2012 ruling, Griesa ordered that Argentina must pay in full the U.S. investment firms that rejected bond swaps in 2005 and 2010 at the same time as servicing its performing debt. Investors who exchanged bonds were paid less than 30 cents on the dollar.

In a separate order, Griesa said the injunction also prohibited Citigroup from processing payments on bonds issued under Argentine law.   Continued...

A Citi sign is seen at the Citigroup stall on the floor of the New York Stock Exchange, October 16, 2012.  REUTERS/Brendan McDermid