Federal District Judge Thomas P. Griesa has made it very clear that he will not change his mind as he rejected an appeal by Citigroup to roll back an injunction forbidding the bank from making interest payments on $2.3 billion of Argentine bonds. The latest decision in the long-running legal battle is a major setback for Citigroup, its bondholder clients and Argentina.
Background on Argentina bond standoff
Thursday’s ruling relates to an earlier decision by Judge Griesa to not allow any interest payments on Argentine debt, a decision that led the country to default last year which locks Argentina out of global debt markets.
What does value investing really mean? Q1 2021 hedge fund letters, conferences and more Some investors might argue value investing means buying stocks trading at a discount to net asset value or book value. This is the sort of value investing Benjamin Graham pioneered in the early 1920s and 1930s. Other investors might argue value Read More
The bond issue goes all the way back to 2001, when Argentina defaulted on nearly $100 billion in bonds. Nearly everyone holding the government bonds exchanged them later for new, significantly discounted ones. However, a group of hedge funds, including Paul Singer’s NML Capital, did not exchange their bonds and went to court seeking full repayment.
In an initial victory for the holdout hedge funds, Judge Griesa ruled that financial institutions making the bond payments could not make payments to holders of the exchanged bonds without also paying the holdout funds.
Then, late last year, the judge permitted Citigroup to make a one-time $5 million payment to Argentina bondholders.This led Argentina to hope for more leniency from the court, but it was not to be.
Implications of Thursday’s ruling
In his earlier rulings, Griesa had prevented Argentina from making payments on all government bonds issued under New York and English law, but he had not ruled on the bonds issued under Argentine law.
“The court’s ruling makes clear that any third-party that attempts to help Argentina in the payment process is in violation of the court’s injunction,” a spokesman for NML Capital noted.
Statement from Citigroup
Citigroup spokewoman Danielle Romero-Apsilos commented that the bank “will pursue all legal measures available to comply both with this decision and Argentine legislation.” She continued to say that Citigroup planned to appeal the decision and had requested the suspension of the injunction pending the outcome of the appeal.