Argentina Appeals New York Bond Judge’s Contempt Finding

Argentina asked an appeals court to reverse a ruling that it’s in contempt of court for disobeying the U.S. judge overseeing suits stemming from its 2001 sovereign debt default.

Argentina asked the New York-based appeals court to overturn the finding of U.S. District Judge Thomas P. Griesa that the country is in civil contempt of court for its plan to shift control over payments of its restructured debt to Buenos Aires, according to a court filing yesterday.

Griesa in September said that Argentine officials wrongly tried to replace Bank of New York Mellon Corp. with Nacion Fideicomisos SA, a government-controlled bank, as indenture trustee for the restructured debt. Argentina is also appealing Griesa’s order finding that the plan to pay the bonds locally, outside the reach of his court, is illegal.

A group of bondholders asked Griesa to fine Argentina $50,000 a day until it complies with his orders. Griesa hasn’t ruled on that request.

Argentina, which hasn’t paid numerous court judgments in favor of defaulted bondholders, may also ignore any fine the judge imposes to force it to comply, lawyers following the case have said.

The nation hasn’t paid a sanction imposed against it in a 2000 case in which a U.S. insurer claimed $4.2 million and won. That amount has grown to $29 million, including interest, attorney fees and a $4,000-a-day sanction for violating a court order.

Record Default

Griesa is overseeing lawsuits involving bonds Argentina repudiated in 2001 when the South American country defaulted on a record $95 billion, roiling international markets and blocking the nation’s access to credit. Argentina exchanged 92 percent of its defaulted bonds for new ones, at a sharp discount, in restructurings in 2005 and 2010. A group led by Paul Singer’s Elliott Management Corp. hedge fund is trying to recover full payment for their defaulted bonds.

Griesa ruled in 2012 that Argentina can’t pay holders of the restructured bonds as long as it refuses to pay off the holders of the defaulted debt. The U.S. Court of Appeals in New York upheld that ruling and it took effect after the U.S. Supreme Court declined to hear the case in June.

Argentine officials have vowed never to pay the holders of its defaulted debt, calling them “vultures.”

New Default

Griesa’s orders triggered a new default on Argentina’s performing debt when BNY Mellon, the bond trustee, refused to forward a $539 million payment on July 30.

The republic on Sept. 30 deposited $161 million in payments intended for performing-debt holders, with Nacion Fideicomisos.

Griesa yesterday expanded the power of his Special Master Daniel A. Pollack to take on additional cases in conducting settlement negotiations with plaintiffs and Argentina. Pollack, chosen as mediator in June, is managing partner of the law firm McCarter & English in New York.

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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