Bank of New York Mellon Corp. asked a U.S. judge to let it hold a $539 million Argentine bond payment he has deemed illegal, arguing the bank will be exposed to lawsuits if it returns the money.
BNY Mellon, which acts as trustee for holders of restructured Argentine debt, asked U.S. District Judge Thomas Griesa in Manhattan yesterday what it should do with the June 26 payment, which the nation made to BNY Mellon accounts in Banco Central de la Republica de Argentina.
Argentina defaulted on a record $95 billion in debt in 2001. Griesa has ordered the country to pay holders of more than $1.5 billion in defaulted bonds when it makes a payment on its performing debt. Last month the U.S. Supreme Court declined to disturb that order.
The combination of rulings in favor of holders of the defaulted bonds, led by billionaire Paul Singer’s Elliott Management Corp., caused Argentina to miss a June 30 payment to holders of the restructured debt. The nation has a 30-day grace period to make the payment before triggering a new default.
Representatives of the bondholders and Argentina’s government met today in New York with a court-appointed special master, without reaching a resolution.
“It is my hope that there will be future dialogue,” the special master, Daniel Pollack, said in a statement.
In its filing yesterday, BNY Mellon told Griesa that holders of Argentina’s restructured bonds have threatened to sue the bank outside the U.S. if it doesn’t keep the $539 million payment in the Banco Central accounts. The bank also faces threatened suits by Argentina and by the defaulted bondholders, it said.
In a hearing the day after Argentina made the payment, Griesa called it an “explosive action” that threatened to disrupt potential talks between the country and its creditors.
“This payment is illegal and will not be made,” Griesa said at the hearing, warning that any further attempt to pay the restructured bondholders without also paying holders of the defaulted debt would be in contempt of court.
BNY Mellon asked Griesa to hold a hearing to consider its request sometime after July 25.
The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).
(The date of the BNY Mellon filing was corrected in an earlier version of this story.)