Judge allows Citigroup to process Argentine bond payment

Fri Sep 26, 2014 6:51pm EDT
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By Nate Raymond and Joseph Ax

NEW YORK (Reuters) - A U.S. judge said Friday he would allow Citigroup Inc (C.N: Quote) to process a disputed $5 million payment by Argentina on bonds issued under its local laws following its 2002 default.

U.S. District Judge Thomas Griesa in Manhattan agreed to an order proposed by bondholders suing Argentina over defaulted debt to allow Citigroup to process the interest payment, which is due Sept. 30.

The ruling gave temporary relief to Citigroup, which has said it faces regulatory and criminal sanctions by Argentina if it cannot process the interest payment on U.S. dollar-denominated bonds issued under Argentine law following the country's 2002 default.

The bondholders that consented to the stay include Elliott Management's NML Capital Ltd and Aurelius Capital Management, both of which did not participate in Argentina's past restructurings.

With the deadline looming, the holdout bondholders proposed allowing the payment to go through by issuing a stay that would allow litigation until the next payment is due on Dec. 31.

"The reason plaintiffs have proposed a stay is so that the parties and Your Honor will not have to deal with these important issues on an emergency basis," Edward Friedman, a lawyer for Aurelius, said.

Citigroup's lawyer, Karen Wagner, pushed Griesa to go even further and rule that the bank was not subject to an injunction at all, after the judge said his prior order favoring the creditors was focused on bonds "payable in New York and governed by New York law."

Griesa ultimately declined to rule Friday, instead giving the parties 30 days to exchange information in order to resolve the issue promptly.   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