Citibank Set Free to Hand Over Argentina’s Debt Payments

El Gobierno argentino había amenazado al banco con revocar su licencia. (Wikimedia)
The Argentinean government has threatened to revoke Citibank’s license to conduct business in Argentina. (Wikimedia)

EspañolOn Monday, New York Judge Thomas Griesa authorized Citibank to process payments amounting to US$85 million in Argentinean government bonds. Faced with growing pressure from the Argentinean government, this is the third time that the bank has appealed to the court to distribute bond payments owed by the South American country.

“In the last two quarters, this court has allowed Citibank Argentina to make ‘one-time’ payments to clients who were bondholders under Argentinean law. But in each instance, it was only allowed when the franchise and its employees were confronted with the prospect of serious damage,” the bank communicated in a statement.

Citibank is responsible for processing payments on maturing bonds issued under Argentinean law. The recent ruling indicates that the bank will have to request authorization from Griesa every three months in order to continue issuing the payments in question.

In June, Griesa denied Bank of New York Mellon’s request to process a payment for US$539 million, which the Argentinean government had already deposited for its restructured creditors. At that time, Griesa argued that the holdouts those who declined the restructured debt deal in 2005 and 2010 should receive the same treatment as the restructured creditors.

Subsequently, the Argentinean government refused to negotiate with the so-called vulture funds, citing the Rights Upon Future Offers clause, which prohibits the government from offering holdouts a better deal than the one the bondholders of its restructured debt previously accepted. When the payment grace period ended in July, Argentina promptly fell back into default.

Between a Rock and a Hard Place

Citibank finds itself under a great deal of pressure from the Argentinean government to issue bond payments. If Griesa had denied Citibank’s request to issue payments, the bank would have been forced to either further anger the Argentinean government, or recognize the court’s decision. The bank decided to seek authorization from the New York court to release the payments.

Monday’s ruling marks the third time that Griesa has granted Citibank authorization to issue payments for matured Argentinean government bonds.

In September, lawyer Karen Wagner asked judge Griesa to overturn bond payment restrictions on Citibank, which faced legal threats from the Argentinean government as well as the potential loss of its Argentinean business license.

In June, the United States Supreme Court rejected an appeal filed by the Argentinean government against the hedge funds, solidifying Griesa’s ruling that Argentina must pay roughly US$1.6 billion to bondholders who chose not to accept the restructured debt deal in 2005 and 2010.

Following the recent ruling, Griesa decided to postpone the next Citibank hearings until further notice. The hearings, which were scheduled for December 9, will attempt to secure further authorization for Citibank to pay creditors.

The Argentinean Government Reacts

“In a new demonstration of inconsistency, Judge Griesa has once again failed to answer the fundamental question and instead authorized Citibank to pay maturities to bondholders under Argentinean law in December for the third and only time,” said the Argentinean Ministry of Economy in a statement.

Chief of the Cabinet of Ministers Jorge Capitanich echoed the sentiment during a press conference: “He always does what the vulture funds ask. [Griesa’s decisions] only add confusion and insecurity to the situation.”

Jorge Lanata Reopens “Money Trail K”

Journalist Jorge Lanata, who in 2013 reported on an alleged money laundering scandal involving President Cristina Kirchner, recently presented new details on the case.

During his television program Periodismo para todos (Journalism for All) on Sunday, November 9, Lanata claimed that the state of Nevada has discovered a “key witness to the financial engineering that allowed the money to be taken from Argentina.”

The witness allegedly presented a 62-page report that, among other things, linked the opening of 123 businesses to Lázaro Baez, a strong supporter and business associate of Kirchner. “We are talking about 123 businesses opened with money from corrupt activity that leads to Cristina Kirchner,” said Lanata.

Adam Dubove contributed to this article.

Translated by Peter Sacco.

Subscribe free to our daily newsletter
Sign up here to get the latest news, updates and special reports delivered directly to your inbox.
You can unsubscribe at any time