Argentina Eurobond Holders Seek Exemption From Block

Holders of Argentina Eurobonds asked a U.S. judge for an emergency ruling to help them recover money from a payment he blocked as the South American nation faces a deadline today for payment on its restructured debt.

U.S. District Judge Thomas Griesa on June 27 ordered Bank of New York Mellon Corp. to return $539 million it received from Argentina for holders of the nation’s restructured debt. Griesa ruled the transfer an “explosive action” that disrupted potential settlement talks with defaulted debt-holders.

The court “purported to nullify Argentina’s payment,” investors’ lawyer Christopher Clark of Latham & Watkins said yesterday in a letter to Griesa. The Eurobond holders are asking Griesa to “clarify” the order to declare them exempt, saying that foreign parties aren’t subject to the U.S. court’s jurisdiction, according to court papers.

“The entire payment process for Eurobonds never enters the U.S. and involves only foreign banks,” bondholders’ lawyers wrote in support of the emergency motion.

The payment is made to a Bank of New York (Luxembourg) account at Central Bank of Argentina, then to a Belgian entity in Frankfurt and finally to investors through clearinghouses in Europe, according to court papers.

Lawyers also said exempting Euro Bond payments will not affect rulings “on over $10 billion” in U.S. dollar bonds.

The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-6978, U.S. District Court, Southern District of New York (Manhattan).

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