Citibank Could Lose Argentina Branch Over Court Order

Citigroup Inc. argued it could lose its Argentina branch if a U.S. appeals court doesn’t overturn an order barring it from distributing money from the South American nation to its bondholders.

Citigroup last week appealed the order by U.S. District Judge Thomas Griesa in Manhattan, saying he abused his discretion in blocking the payments. The appeal will be argued Sept. 18.

The third-biggest U.S. bank said in a brief filed today that it expects to receive $5 million from Argentina for a scheduled Sept. 30 interest payment due to customers holding the South American nation’s restructured debt. The New York-based bank said it faces “grave sanctions” under Argentine law if it obeys Griesa’s order and doesn’t pay.

Citigroup said it could face “consequences as serious as the loss of Citibank Argentina’s banking license and its takeover by the Republic.”

In a nationwide address Aug. 7, Argentine President Cristina Fernandez de Kirchner warned that Citigroup “must comply with the country’s laws.”

Argentina defaulted on a record $95 billion of debt in 2001. Holders of about 92 percent of the debt agreed to exchange their bonds for new ones at a discount of about 70 percent in debt restructurings in 2005 and 2010. Holdouts including Paul Singer’s NML Capital sued, seeking full payment.

Griesa has blocked Argentina from paying holders of the restructured bonds unless it also pays Singer and other holdouts more than $1.5 billion.

Standard & Poor’s declared Argentina in default on the restructured bonds July 30 after the government failed to make an interest payment as a result of Griesa’s order.

The case is Aurelius Capital Master Ltd. v. Republic of Argentina, 14-2689, Second U.S. Circuit Court of Appeal (Manhattan).

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