Citigroup to revisit U.S. court over Argentine bond payments

Thu Oct 23, 2014 1:28pm EDT
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By Nate Raymond

NEW YORK (Reuters) - A U.S. judge has scheduled a Dec. 2 hearing to weigh whether or not Citigroup Inc (C.N: Quote) can process an expected interest payment by Argentina on bonds issued under its local laws following its 2002 default.

The hearing before U.S. District Judge Thomas Griesa in Manhattan, set out in an order issued late Wednesday, would be less than a month before a Dec. 31 interest payment by Argentina on the bonds is due.

Citigroup has said it faces regulatory and criminal sanctions by Argentina, which defaulted again in July, if it cannot process the country's interest payments on U.S. dollar-denominated bonds issued under Argentine law.

Argentina defaulted in July after refusing to honor a court order to pay $1.33 billion plus interest to so-called "holdout" bondholders led by Elliott Management's NML Capital Ltd and Aurelius Capital Management when it paid holders of bonds swapped during the country's 2005 and 2010 debt restructurings.

The hedge funds had spurned Argentina's past restructurings, which resulted in exchanges for about 92 percent of the country's defaulted debt. Investors who accepted Argentina's terms were paid less than 30 cents on the dollar on average.

Griesa, who oversees the litigation, in July blocked Bank of New York Mellon Corp (BK.N: Quote) from processing a $539 million interest payment on what the country says is over $28 billion in restructured debt. That order sent Argentina on a course to default after failing to reach a settlement with the holdouts.

Separately, the federal appeals court in New York on Thursday scheduled a Dec. 17 oral argument for Argentina's appeal of a September 2013 order from Griesa, requiring the country and 29 non-party banks to comply with dozens of subpoenas and information requests from the holdouts.

Argentina said these demands were overbroad, and that the holdouts should not be allowed to pursue property protected by treaty or federal law. The holdouts said Argentina cannot be trusted to decide which property is immune from their claims.   Continued...

The Citibank logo is pictured at its Nicaragua headquarters in Managua October 16, 2014.  REUTERS/Oswaldo Rivas