U.S. appeals court says bondholders can't seize Argentina's reserves

Mon Aug 31, 2015 4:45pm EDT
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By Nate Raymond

NEW YORK (Reuters) - Argentina's central bank on Monday won the reversal of a U.S. court ruling that had allowed bondholders to try to hold it responsible for the country's obligations on debt that has been in default since 2002.

The 2nd U.S. Circuit Court of Appeals in New York overturned a 2013 ruling denying a bid by Banco Central de la República Argentina (BCRA) to dismiss claims by U.S. investment firms holding $2.4 billion in judgments against the South American country.

U.S. District Judge Thomas Griesa had previously held that the central bank had waived its sovereign immunity, and that as a result, the hedge funds could move forward with a lawsuit targeting the bank's assets.

Argentina is lobbying internationally for tighter controls on the activities of junk debt specialists, which President Cristina Fernandez's leftist government brands "vultures."

The ruling "sets an international precedent and guarantees that vulture funds will not be allowed to seize the reserves of the central bank," bank President Alejandro Vanoli said in a statement.

Argentine bonds traded over-the-counter recovered early-session losses after the ruling.

The ruling had been sought by bondholders, including NML Capital Ltd, which is a unit of Paul Singer's Elliott Management Corp, and EM Ltd, controlled by investor Kenneth Dart, who sought to go after funds BCRA held in foreign jurisdictions.

But the three-judge panel of the 2nd Circuit reversed, saying BCRA could invoke its own sovereign immunity to avoid liability. It directed Griesa to dismiss the case.   Continued...

Pedestrians past by Argentina's Banco Central (Central Bank) in Buenos Aires' financial district, March 26, 2015.
REUTERS/Agustin Marcarian