U.S. judge rules against Argentina in debt case
* Judge rules Argentine Central Bank not independent* Attachment hits bond prices, risk spreads (Adds bonds fall, country risk, details and byline)
By Fiona Ortiz
BUENOS AIRES, April 7 (Reuters) - Some $100 million in Argentine Central Bank deposits in New York can be seized to pay two investment funds that sued Argentina over unpaid debt, a U.S. federal judge ruled on Wednesday.
The Argentine funds held in the U.S. Federal Reserve Bank in New York have been frozen since 2006, but another judge delayed their attachment pending an investigation into whether the Central Bank could be considered part of the Argentine state.
Judge Thomas Griesa of the United States District Court of the Southern District of New York on Wednesday ruled that funds of the Central Bank, also called the BCRA, are really those of the Republic of Argentina saying evidence shows that the bank is not autonomous.
"The court ... concludes that the $105 million was in fact not the property of BCRA held for its own account, but was the property of the Republic," Griesa wrote in his ruling for the plaintiffs in the case.
The plaintiffs in the case are EM Ltd and NML Capital. The latter is an affiliate of Elliott Management Corp and one of the biggest holders of Argentine defaulted debt.
A spokesman for Elliott said the company had no comment.
The judge rejected arguments by the Argentine government that the Central Bank funds are immune because the bank is autonomous.
DEBT SWAP
Wednesday's ruling came a week before Argentine President Cristina Fernandez's cash-strapped government seeks to woo investors by swapping some $20 billion in defaulted bonds left over from the country's massive 2002 default.
Next week's swap offer is meant to neutralize the threat of lawsuits from so-called holdout bondholders who are trying to recover the full, face value of their defaulted debt.
They rejected a previous government offer to swap the paper at a steep discount in 2005.
The bondholders have won several judgments against Argentina in U.S. courts, but so far they have not been able to seize any Argentine money or property.
Argentina argues that bondholders who did not accept the terms of the 2005 exchange cannot be paid the full face value of their debt because that would be unfair to those who did accept losses in the deal.
A Central Bank spokesman did not immediately have comment on Wednesday's ruling, but it is likely to be appealed.
An attachment is a step in the process in which a plaintiff could actually receive money. Other filings and procedures would have to be completed before payment.
Argentine bond prices closed down 0.8 percent on average in local, over-the-counter trade in reaction to news of the ruling, which investors initially thought might refer to a new embargo on Argentine funds in the United States.
The spread between the yield on benchmark Argentine bonds and on comparable U.S. Treasuries widened 21 basis points to 636, according to the JP Morgan Emerging Markets Bond Index 11EMJ.
http://www.reuters.com/article/idUSN0717036220100407?type=marketsNews
Very interesting article. I had no idea the US was involved to that extent with Argentina's government.
ReplyDeleteI think that US business often is conducted in other countries and we as US inhabitants often don't realize what we are doing as a country to other countries, by exploiting their workers and their economy
ReplyDeleteI found this very interesting, I would never think that the United States could compare it's current economic situation with Argentina's economy. I also like Cindy, never knew that the United States was involved with Argentina's government at all.
ReplyDeleteThank you for posting that article about the Argentines economic troubles. It makes me wonder what would this country do if a large number, I mean millions, of US bondholders cashed in. I imagine that the Argentine debt is nothing compared to the US debt. You see over the last 8 years of the past administration every time a bill was passed and billions of dollars were needed they wouldn’t try and find the money in the budget they would just sell more bonds and the majority share holder is China. Just something to think about.
ReplyDeleteHi Dave. Thank you for posting that. I have heard about that regarding China and quite frankly it worries me and makes me wonder where the USA will end up when all is said and done. It also makes me wonder what we are thinking!
ReplyDeleteyea i agree with jarica. i do not think that we are privied to this information as U.S. citizens...however it does impact our economy and the relationship that we have with other countries.
ReplyDelete