Citibank Says Argentina Bond Order Delay to Be Sought

Citibank NA asked a U.S. judge to allow it to make Sept. 30 payments on Argentine bonds, saying they shouldn’t be subject to a 2012 court ruling prohibiting payments on the country’s exchange bonds.

The company said in a request today to U.S. District Judge Thomas Griesa in Manhattan that if he doesn’t allow Citibank Argentina to make the payments, it could face civil and criminal liability as well as revocation of its banking license in the South American country.

Griesa has said Argentina can’t pay holders of its performing debt without also paying a group led by Paul Singer’s NML Capital that’s owed $1.5 billion on the country’s defaulted bonds. Citibank claims the bonds on which it expects to receive the interest payment from Argentina shouldn’t be included in the order barring payment.

Citibank said in the filing that bonds issued under Argentina law are different from the “exchange” bonds the country issued to holders of its defaulted debt and for which Bank of New York Mellon Corp. is the trustee. The judge allowed Citibank to make payments on the Argentine law bonds in June.

Griesa set a hearing on the matter for Sept. 26 at 3 p.m., according to a court clerk.

‘The Gun’

Karen Wagner, a lawyer for the company, last week told a federal appeals court in Manhattan that Citibank will obey Griesa’s order if it isn’t overturned or changed, subjecting its century-old Argentina branch to threatened criminal and civil penalties under local law.

“We’re going to obey, and if we obey, we have a gun to our head and the gun will probably go off,” Wagner told a three-judge appeals panel court Sept. 18.

The panel court rejected the appeal the next day, returning the case to Griesa.

Argentina’s Economy Minister, Axel Kicillof, said in a radio interview today that Citibank, a unit of New York-based Citigroup Inc., faces “an enormous mess” if it fails to make the payment to holders of $8.4 billion of U.S. dollar-denominated Argentine bonds, issued under local law and payable in that country.

“The lawyer for Citibank used a phrase that Citibank has a gun to its head,” Kicillof said. “It doesn’t have any guns to its head, it has Argentine law to its head because it’s an Argentine institution.”

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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