Appellate Help Denied in Argentina’s Debt-Crisis Saga

     MANHATTAN (CN) – A day after being told that the gun pointed to Citibank’s head would “go off” on Sept. 30 without help, the 2nd Circuit said its hands are tied.
     Although Citibank is not dead in the water, its Argentine subsidiary could be in a heap of trouble depending on what happens in the lower court before the end of the month.
     By that time, Citibank must transfer $5 million to Argentinian bondholders owed interest under the country’s 2005 and 2010 debt restructuring agreements. Roughly 93 percent of the bondholders have agreed to Argentina’s terms, but two hedge funds owned by Republican billionaire Paul Singer have held out on the deal.
     So-called “vulture funds” NML Capital and Aurelius Capital Management gobbled up Argentina’s distressed debt for pennies on the dollar during an economic crisis in 2001, and then sued the country in Manhattan six years later for its full value.
     U.S. District Judge Thomas Griesa ruled in July that no other bondholder could get paid until Singer’s funds get $1.3 billion, or a different amount on which the parties could settle.
     Citibank will be in violation of Griesa’s order if it completes the Sept. 30 transfer.
     If it does not, Citibank Argentina could lose its license, or its Buenos Aires-based executives could face criminal prosecution.
     At the 2nd Circuit hearing on Thursday, Judge Reena Raggi told Argentina’s lawyer that his client was “holding the gun” to Citibank’s head.
     Citibank attorney Karen Wagner agreed that was true.
     The appeals court rejected Citibank’s appeal anyway Friday, citing a lack of jurisdiction.
     But Citibank’s fight isn’t over, the panel remarked in a two-page order.
     “Nothing in this court’s order is intended to preclude Citibank from seeking further relief from the district court,” the panel ruled.
     Lawyers for the Citibank, Argentina and the hedge funds did not respond to a request for comment by press time.

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