Argentina’s Italian Investors Seek Access to Frozen U.S. Account

About 100 Italian investors holding Argentina’s defaulted debt from 2001 asked a U.S. judge to force Bank of New York Mellon Corp. to repay them using $539 million being held in a frozen account for the South American country.

Argentina deposited the money in June to make an interest payment to creditors who accepted new terms for its restructured debt. The Italians didn’t accept the new terms and seek to collect on court judgments in their favor, they said in a filing yesterday in Manhattan federal court.

“There’s a good number of the holdouts who paid 100 cents on the dollar for their bonds,” Rudolph Di Massa, an attorney for the bondholders, said by phone. “Many of the Italians I represent, this was part of their retirement fund and they’ve been waiting now for 15 years.”

U.S. District Judge Thomas Griesa, who is overseeing a lawsuit by a group of U.S. hedge funds that also refused the new terms, barred Argentina from making the interest payment and froze the money until the nation pays the funds $1.5 billion -- an order Argentina has refused to comply with.

“The Republic has steadfastly frustrated any attempt made by the Italian judgment creditors to collect on these judgments, choosing instead to lump” them together with “so-called ’vulture funds’ despite the dissimilarities between the two groups,” another lawyer, Anthony Costantini, said in the filing yesterday.

Interest Payment

Griesa, whose order blocking the interest payment, and the failure of the two sides to reach a settlement, led to a second default, has ordered the nation and the holdout creditors in the case to keep talking in a bid to resolve the crisis. The judge also ordered lawyers for the parties into court today to discuss Argentina’s full-page advertisement printed in in U.S. newspapers yesterday questioning the court’s jurisdiction.

The Italian investors “declined to accept the exchange offers in 2005 and 2010, as was their right, since those offers would have yielded only a small percentage of their actual investments,” Costantini said in the filing.

The U.S. hedge funds leading the case against Argentina are being led by billionaire Paul Singer’s NML Capital.

The group seeks about $210 million, Di Massa said.

“There’s a good number of the holdouts who paid 100 cents on the dollar for their bonds,” he said.

The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).

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