Kyle Bass, founder of hedge fund Hayman Capital Management LP, and other investors including George Soros and his Quantum Partners LP are suing The Bank of New York Mellon Corporation (NYSE:BK) in London for failure to distribute interest payments of 226 million euros ($298 million) relating to Argentine sovereign debt. The group of investors involved in the lawsuit owns more than 1.3 billion euros of Argentina’s euro-denominated bonds, according to court documents reviewed by Bloomberg News.

Also read Kyle Bass On The Bullish Case For Argentinian Debt 

Kyle Bass
Kyle Bass courtesy of Hayman Capital

Argentina’s euro-bond interest should be paid

The lawsuit was filed against The Bank of New York Mellon Corporation (NYSE:BK)’s London division on August 21st, and argues that the bank is legally required to pass along euro-denominated interest payments despite a U.S. court ruling that prevents the trustee from making payments until Argentina has also paid holders of defaulted bonds from 2001. The U.S. court ruling shouldn’t apply to debt issued outside of American jurisdiction, according to Bass and Soros.

Argentina deposited $539 million into an account at BNY Mellon for an upcoming interest payment back in late June, but did not make a $1.5 billion payment on defaulted bonds from 2001. A judge in New York ruled the interest payment “illegal” and blocked BNY Mellon from forwarding the funds to investors. The money is still in the bank account in Buenos Aires.

Statement from Kyle Bass

“They failed to transfer the euro funds in accordance with their trust obligations,” Bass said in a recent telephone interview. “Our interest payment is governed by U.K. law, which hasn’t ruled on this. Until there’s a similar injunction in the U.K., they owe us our interest payments.”

Statement from The Bank of New York Mellon

“The suit is without merit,” Ron Gruendl, a spokesman for New York-based The Bank of New York Mellon Corporation (NYSE:BK), said in a statement issued on August 22nd. “BNY Mellon has consistently followed the binding court orders that govern its actions as trustee in this matter.”

The government of Argentina is attempting to pass legislation to remove The Bank of New York Mellon Corporation (NYSE:BK) as trustee and begin making interest payments locally through state-run Banco de la Nacion Argentina.

The Argentine euro bonds due 2033 in question were up 0.04 cents to 76.84 cents as of late Monday afternoon.