November 29, 2014
Griesa fires cash back at government
US District Judge Thomas Griesa yesterday fired back against Argentina’s decision to make a sovereign debt payment in defiance of a court order, calling it an “explosive action” and ordering Bank of New York Mellon to return the money to the government.
Hours later, it was the government who made it clear it would not end its confrontational stance, saying Griesa wanted to “provoke a default” with his “senseless and unheard of” decision of blocking payments, which showed how the judge “has abused his power.”
The tough language in Buenos Aires and New York was part of a 12-year-long legal chess game between Argentina and creditors who refused to accept the downgraded terms offered by the country’s 2005 and 2010 debt restructurings and are suing for full payment.
In a closed meeting held in New York, Griesa told lawyers representing Argentina and BNY Mellon that any attempt to make payment to bondholders without complying with his court is illegal and urged both parties to reach an agreement to end the legal dispute that could push the country toward default on July 30.
“It cannot be done and it will not be permitted by this court. I want the banks involved to know that. This payment cannot be made and anyone who attempts to make it will be in contempt of this court,” said Griesa, who was appointed judge by US President Richard Nixon in 1972.
On Thursday, Argentina deposited US$539 million in BNY Mellon’s account at the Central Bank of Argentina intended only for bondholders who participated in two sovereign debt exchanges in 2005 and 2010. The deposit was made, Argentina said, in order to meet a June 30 coupon payment deadline. There is a 30-day grace period, however, before a default can be declared if exchange bondholders do not receive their money.
Griesa “has abused his power and gone outside of his jurisdiction because the holders of restructured bonds are not the object of this litigation,” the Economy Ministry said yesterday afternoon. “The funds are not property of Argentina, they belong to third parties,” adding that the measure is “unheard of” because “a judge is trying to prevent a debtor from paying his obligations.”
In court, BNY Mellon confirmed Thursday’s deposit was made into its account and told Griesa it was seeking to comply with his orders. “Those funds remain in that account. Nothing more has happened,” BNY Mellon’s lawyer Eric Schaffer of Reed Smith told Griesa.
Griesa’s order says Argentina cannot pay exchange bondholders without also paying the holdouts at the same time under the pari passu, or equal treatment, clause in the original bond contract.
“The money should be returned to the republic. Simple as that,” Griesa said, adding that Argentina should get back to the negotiating table.
Griesa expressed frustration several times at Argentina’s failure to engage in negotiations with NML as the payment deadline gets closer. “Why haven’t settlement negotiations gone forward?” Griesa asked. “Why aren’t they going forward today instead of having us sit in court?”
Griesa said he appointed New York financial trial lawyer Daniel Pollack as a “special master” this week to facilitate talks because Argentina indicated through its lawyers that it planned to negotiate for the first time with the holdouts. He said he believed some discussions had occurred and that there were talks about how to prevent Argentina from facing default on Monday.
“A special master could have figured out how to have that done,” Griesa said.
Pollack said he was “making every effort” to get the parties to the table. The holdouts and Argentina have both said they want to negotiate in good faith yet substantive meetings have not yet occurred.
Robert Cohen, one of the lawyers for hedge funds holding the defaulted debt, told Griesa that Argentina “defiantly and contemptuously” violated his court orders. Cohen said Argentina was “in contempt of court” because of violating the court’s order and to implement “quickly” the Discovery order through which hedge funds could seize country’s assets abroad.
Carmine Boccuzzi, one of the lawyers for Argentina, told Griesa at the hearing that the country still hoped for a negotiated settlement. Jay Newman, a money manager at NML, said “we are hoping to have the opportunity to negotiate with Argentina.”
Griesa denied a request by holders of euro-denominated exchange bonds, who argued that his orders shouldn’t apply to those securities as their payments are made entirely outside of the US.
The judge replied that his orders apply to payments made by Argentina, which agreed to US jurisdiction when it issued the original bonds.
Griesa also declined to sign orders requiring payment to five holders of defaulted bonds not involved in the NML case but with similar claims, saying he wanted to avoid further complicating possible settlement talks.
“Their rights aren’t going to go away,” Griesa said.
Earlier this week, Griesa rejected a request by the federal government to extend the deadline to repay the debt creditors the country has often referred as “vultures.” In order to pay holders of the country’s restructured bonds without being in contempt of court, Argentina said it needed a stay to be issued by Griesa that would have temporarily suspended his order for the country to pay holdouts simultaneously.
Herald with Reuters,AP,Télam