U.S. Judge Griesa Holds Argentina in Contempt in Debt Case

Politics Reuters

Argentina is in contempt of court, a U.S. judge ruled on Monday, the latest step in a years-old case brought by U.S. hedge funds over defaulted debt.

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U.S. Judge Thomas Griesa in New York held off on any decision on fines or sanctions against the South American country, which in July fell into its second sovereign default in 12 years and has long been at odds with Griesa's decisions and adopted a law aimed at evading them.

"The problem is that the Republic of Argentina has been and is now taking steps in an attempt to evade critical parts" of the order, Griesa said during a hearing in his lower Manhattan courtroom.

Argentina defaulted in 2002 and missed a bond coupon payment in late July after Griesa ruled it could not be made unless the country also paid more than $1.3 billion to a group of U.S. funds that rejected previous bond restructurings and are demanding full repayment.

Argentina said earlier on Monday that a contempt order from Griesa would violate international law.

Argentina defaulted in 2002 and missed a bond coupon payment in late July after Griesa ruled it could not be made unless the country also paid more than $1.3 billion to a group of U.S. funds that rejected previous bond restructurings and are demanding full repayment.

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It was not clear whether the order would have any practical impact on a populist government that regularly condemns the funds as "vultures" and has shown itself willing to defy Judge Thomas Griesa's rulings.

Plaintiff bondholders, led by Elliott Management Corp's NML Capital Ltd and Aurelius Capital Management, have urged Griesa to consider unspecified non-monetary sanctions that could push the country to comply.

Those sanctions might, for instance, include barring Argentina from doing business with U.S. banks, though such a ruling would likely engender fresh litigation over whether Griesa has the authority to do so.

NML and Aurelius renewed their request for a contempt finding last week, citing the Sept. 11 passage of a new law allowing a swap of previously restructured debt for bonds payable in Argentina under its local laws.

The legislation allowed for the replacement of Bank of New York Mellon Corp as trustee for some of the exchange bonds, after the judge blocked it from processing a $539 million interest payment that Argentina had deposited in June.

Argentina will deposit its next interest payment due on its restructured debt on Tuesday, a source at the central bank said. The payment of at least $200 million is to be deposited with and paid out by local trust Banco de la Nacion Fideicomiso.

"The deposit will be made tomorrow, which is the date the coupon payment is due," said the source at the central bank.

 

(By Joseph Ax and Nate Raymond; Additional reporting by Hugh Bronstein and Richard Lough in Buenos Aires; editing by Andrew Hay)