News Column

US court halts Argentina's bond repayment

June 28, 2014

US judge tells Argentina to sit down for talks with plaintiff creditors.

By Charles Newbery

BUENOS AIRES, Argentina 

A U.S. federal judge told Argentina on Friday not to make a bond payment in violation of his orders to pay back plaintiff creditors at the same time, pushing the country closer to its second default in 13 years.

U.S. federal judge Thomas Griesa said in a hearing in New York that the payment would be "illegal" because it would be in breach of his order to pay $1.5 billion owed to creditors holding bonds left over from a 2001 default on $100 billion.

Griesa made the comments a day after Argentina said it had transferred $539 million to the Bank of New York Mellon to cover part of the $1 billion in bond payments due Monday. The money is owed to 92.4 percent of creditors who accepted 30 cents on the dollar in restructures of the $100 billion in bonds it defaulted on in 2001.

The plaintiff creditors, including American billionaire Paul Singer, held out of the restructures to seek full repayment through legal channels.

A handful of them won a drawn-out court battle in the U.S., which has jurisdiction over payment of some of the bonds, last week. They can now collect repayment in full at the same time as Argentina makes its next payment on the restructured bonds.

This raised the risk for Argentina that the creditors could seize the funds, but Griesa told the bank to return them to Argentina.

This means that Argentina has a 30-day grace period, or until July 30, to find a solution on how to pay both the plaintiffs and the restructured bondholders or go into default on the bonds. 

Griesa said he wants both sides to enter into talks to find a solution.

Daniel Pollack, a New York attorney appointed by Griesa to mediate in the negotiations, said the talks were to start Friday, Buenos Aires newspaper Clarin reported.

Eugenio Bruno, a debt renegotiation specialist at a Buenos Aires law firm, said Griesa's latest decision puts the ball back in Argentina's court.  

What comes next "now depends on what Argentina does in the next 30 days," Bruno said on Radio Ciudad.

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Source: Anadolu Agency (Turkey)

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