Argentina, Judge On Collision Course

Jun 27 2014 | 9:19am ET

Argentina’s desperate effort to stave off a default on Monday is set to come to a head this morning in a Manhattan court room.

U.S. District Judge Thomas Griesa has scheduled a hearing for 10:30 to discuss Argentina’s latest move in apparent violation of his orders: The deposit of US$832 million in several banks to pay its restructured debt on Monday without also paying the hedge-fund holdouts from its 2001 default that it owes US$1.5 billion.

Griesa, who initially ruled in the hedge funds’ favor and has since been backed by the U.S. Supreme Court, just yesterday refused Argentina’s request for a new stay, allowing it to pay restructured bondholders while negotiating with the holdouts, led by Elliott Management and Aurelius Capital Management. Those hedge funds quickly appealed to Griesa after Argentina announced the deposits, accusing the country of yet another “brazen step in violation of this court’s orders.”

“Argentina is taking steps to make payments on the exchange bonds as scheduled on June 30, without making ratable payments to plaintiffs, as this court requires,” Elliott’s letter to Griesa reads. “Argentina should be made to show cause why it should not be held in contempt.”

Argentina did not seek to hide the step: Economy Minister Axel Kicillof, who was in New York on Wednesday to pledge to negotiate, said that it had deposited US$832 million to make the coupon payments on Monday. “Of that total, US$539 million was deposited in the accounts… of the Bank of New York Mellon at the Central Bank of Argentina,” with the rest deposited at other financial institutions. “We affirm our commitment to honor our debt to all creditors.”

Elliott also took aim at BNY, telling the court that it contacted the firm to “remind it of its obligations under the court’s orders and federal rule.” Kicillof said that the deposits were a sign of Argentina’s willingness to pay its creditors, and that “any conduct that tries to hinder these payments to creditors constitutes a serious violation of international law.”

Argentina had previously said it would be “impossible” to make the coupon payment following the Supreme Court’s decision not to hear its appeal, and this week added that it needed a stay from Griesa to negotiate. But Griesa, in the face of opposition from the holdouts, refused, calling the request “not appropriate.”

Kicillof blasted that ruling as “absurd” and said it “constitutes a sophisticated way to try and bring us to our knees before global usurers.”

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