Argentine Funds Can’t Be Seized by Bond Holders, Judge Says
By Patricia Hurtado and Drew Benson - Mar 29, 2012 12:09 AM GMT+0200
A U.S. court order restraining $2.2 billion held at the Federal Reserve Bank of New York forCitibank NA and an Argentine bank was lifted by a federal judge in Manhattan.
U.S. District Judge Thomas Griesa in August ruled that funds in accounts of Banco Central de la Republica Argentina and Citibank couldn’t be transferred. Griesa said the plaintiffs, which are investment funds, had alleged the assets were for payment to holders of some Argentina bonds, known as BODEN 12.
Griesa today reversed that decision, saying no accounts of Banco Central and Citibank at the New York Fed are being used by Argentina for “commercial activity” in the U.S., and therefore can’t be seized by the plaintiffs in satisfaction of prior judgments issued by the judge.
‘Defying Its Obligations’
Argentina “is defying its obligations under the law,” Griesa said.
Aurelius Capital Partners LP, Blue Angel Capital I LLC and EM Ltd., which own defaulted Argentine bonds, had been seeking the funds to collect on judgments awarded by Griesa. Aurelius and Blue Angel were awarded 11 final judgments against Argentina for a total of $1.2 billion, Griesa said. EM Ltd. was awarded a final judgment of about $595 million, he said.
‘Litigation Risk’
The judge’s ruling comes two days after President Barack Obama said the U.S. plans to suspend trade preferences for Argentina in retaliation for its failure to pay American companies arbitration awards related to the default.
“All of these headlines reaffirm that Argentina continues to face litigation risk and that it hasn’t normalized relations with external creditors,” Morden said. “That’s part of the reason why Argentina’s borrowing costs remain high.”
The extra yield investors demand to hold Argentina government dollar bonds instead of U.S. Treasuries is 849 basis points, the highest spread among major emerging market nations afterVenezuela, according to JPMorgan Chase & Co. (JPM)’s EMBI Global index.
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