Buenos Aires making moves to pay bondholders in Argentina: Kirchner
August 21, 2014, 12:04 am TWN
BUENOS AIRES, Argentina--Buenos Aires on Tuesday moved to pay bondholders domestically after a U.S. bank left it unable to do so, President Cristina Kirchner said.
"To protect the payments to bondholders who took part in the 2005 and 2010 debt swaps, we are designating the (state) Banco Nacion Trust as a replacement for Bank of New York Mellon, however the bondholders decide (to take payment), voluntarily," Kirchner said in a televised address.
In July, U.S. Judge Thomas Griesa ordered a freeze on some Argentine payments until Buenos Aires simultaneously pays off the hedge funds which sued the country to demand payment on their bonds.
Argentina placed US$539 million into an account of Bank of New York Mellon at the Argentine central bank at the end of June to meet a scheduled payment to holders of the country's restructured bonds.
But Griesa forbade the bank from transferring the money to the bondholders, in line with his previous 2012 ruling.
Argentina, he said, must first comply with an order that hedge funds which did not join the bond restructuring program after the country's 2001 default be paid in full for the US$1.3 billion in bonds they hold.
Argentina says the hedge funds gave up the chance for payment when they rejected the restructuring deal, which was accepted by 92 percent of the country's creditors.
But Griesa has repeatedly ruled in favor of the hedge funds, NML Capital and Aurelius Capital Management, and threatened to hold Bank of New York in contempt of court if it transfers the money.
He also forbade the bank from returning the money to the Argentine government.
Holders of eurobonds and other non-dollar-denominated Argentine debt say the New York court does not have jurisdiction over their bonds, and that their payments should not be held up by the claims of the hedge funds.
Argentina and the hedge funds have sought to find a compromise, most recently exploring whether another group of investors, mainly banks, could buy the hedge funds' bonds to satisfy their claims.
But those talks went nowhere, leaving the parties at odds as the country — already ruled in default by ratings agencies — approaches new scheduled interest payments in coming months.