Argentine Bank can’t be seized by bondholders of country’s defaulted bonds

You might also like

Afghan relations Pakistan still wants to rub shoulders despite allegations

03/02/2018

Gunbattle said to be occurring near Afghan military academy

29/01/2018

BUENOS AIRES: Argentina won a rare victory in its battle with disgruntled creditors in the U.S.
Cash held in New York by Argentina’s central bank can’t be seized by holders of the country’s defaulted bonds, a federal appeals court ruled Monday in Manhattan.
The court ruled U.S. District Judge Thomas Griesa in New York erred in 2013 when he denied the central bank’s request to dismiss the case on sovereign-immunity grounds. The appeals court ordered Griesa to dismiss the case.
Argentina defaulted in 2001 on a record $95 billion of foreign debt. Holders of about 93 percent of the bonds agreed to take new exchange bonds in 2005 and 2010, at a deep discount. Some holdouts later won judgments against Argentina ordering immediate repayment, which the nation has refused.
The lawsuit by investors NML Capital Ltd. and EM Ltd. sought a declaration that the Banco Central de la Republica Argentina, or BCRA, is an “alter ego” of the country, and liable for paying them almost $2.6 billion.
The appeals court chastised Argentina for its continued failure to pay judgments against it. The court said the ruling in favor of Argentina may have the “unfortunate outcome” of bolstering the country’s refusal.
“Our decision that BCRA may invoke its own sovereign immunity in this lawsuit is not intended to allow the republic to avoid its bargained-for obligations, or to continue shirking the debts it has the ability to pay,” the court said.
Bonds Rise
Argentina’s defaulted bonds due in 2033 rose 1.1 cent to 101.88 cents on the dollar at 2:40 p.m. in New York. The payment on the notes has been blocked since last year when Argentina failed to comply with Griesa’s ruling to pay a group of holdout creditors at the same time as servicing its restructured debt.
The decision “sets an international precedent and guarantees in a decisive manner that the central bank’s reserves cannot be embargoed,” Alejandro Vanoli, president of the central bank, said in an e-mailed statement.
Michael O’Looney, a spokesman for NML, declined to comment on the decision.
Argentina claimed the suit is barred by the Foreign Sovereign Immunities Act, which limits claims against foreign countries. The country also said the suit should be dismissed because the bondholders failed to allege sufficient facts to show that Argentina dominates the central bank.
The appeals court rejected investors’ claims that the Argentine central bank’s activity in the U.S. — the use of its account at the Federal Reserve Bank of New York — constituted commercial activity that could lead to seizure of the assets.
“Whatever adverse consequences plaintiffs allegedly suffered from the BCRA’s loans to Argentina, they would have suffered the same consequences had BCRA used any other bank account in the United States or abroad,” the appeals court said.
The case is EM Ltd. v. Banco Central de la Republica Argentina, 13-3819, U.S. Court of Appeals for the Second Circuit (Manhattan).