New York Judge Thomas Griesa
New York Judge Thomas Griesa has declared Argentina to be in contempt of court for refusing to pay debt owed to bond holdouts, though stopped short of issuing sanctions.
According to Griesa’s own 2012 ruling, Argentina owes around US$1.3bn to the so-called vulture funds who refused to enter into a restructuring deal after the country’s 2001 debt default and demanded full repayment via US courts.
Since 30th July, the country has been in a ‘technical default’ after Griesa blocked the transfer of US$539m in interest payments to bondholders who did enter the restructuring deal. The funds, which Argentina had deposited on time, remain held up with its US trustee Bank of New York Mellon.
Griesa had previously resisted calls by NML Capital, one of the funds leading the litigation against Argentina, to find the country in contempt for not complying with the court order. His decision yesterday comes after the government approved a law to pay its exchange bondholders via a bank in Argentina, thereby circumventing the block on payments processed in the US.
However, Griesa delayed the application of sanctions for a later date, with NML Capital demanding a daily fine of US$50,000.
The government in Buenos Aires was quick to respond to yesterday’s decision, which it called “a violation of international rights”.
“Judge Griesa’s decision serves no practical purpose other than to provide new material for the defamatory political and media campaign being led by the vulture funds against Argentina,” read a strongly-worded statement from the Ministry of Foreign Affairs.
This morning Cabinet Chief Jorge Capitanich added that Griesa’s ruling “has no reason, foundation, or impact.”
The government is today expected to deposit a further US$170m due to be paid to exchange bondholders by 30th September.
Under the debt law approved by Congress earlier in September, payments will be processed by the newly-created ‘Nación Fideicomiso’ trust held at Argentina’s central bank. However, it is not yet clear if the funds will reach all exchange bondholders, or if they will accept the change in payment jurisdiction.
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