A US court today rejected an appeal by Citigroup to release it from a judge’s order blocking payments to holders of restructured Argentine debt.
Citigroup presented its case to the appeals court yesterday, saying Griesa’s order to block US$5m in interest payments due to be paid on 30th September would leave the bank facing potential civil or criminal penalties in Argentina, putting its operations in at risk.
“We’re going to obey, and if we obey, we have a gun to our head and the gun will probably go off,” Citibank’s lawyer, Karen Wagner, told the hearing.
The court said it did not have jurisdiction to intervene because the order being appealed was a “clarification, not a modification” of the original ruling by New York judge Thomas Griesa in February 2012.
This original ruling stated that Argentina must pay the holdouts – led by so-called vulture funds – at the same time as it does those who accepted debt restructuring in 2005 and 2010, based on the “pari passu” clause of equal treatment.
After the US Supreme Court refused to revoke the order in June, Argentina fell into a ‘technical default’ on 30th July as Judge Griesa blocked banks from processing payments to its exchange bondholders.
Since then, the government has been seeking ways to circumvent the ruling, including approving new legislation to pay bondholders through the state-owned Banco Nación rather than the Bank of New York Mellon.
The appeals court rejection came within 24 hours, though stated that it does not prevent Citigroup from seeking relief from Judge Griesa.
Earlier in the month, the New York judge said that he would wait for a decision by the appeals court before ruling on a subpoena request from vulture fund NML Capital Ltd to force Citigroup to reveal details of the pressure being exerted by the Argentine government.
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