Surprising no one, Argentina’s Economy Minister, Axel Kicillof, announced that the litigious Latin American nation would be suing Citibank.
Citibank “signed a deal with the devil on March 2oth, with the vulture hedge funds, to abandon Argentina,” he said.
On March 2oth, Citibank signed a deal with NML (the “vulture funds”), a group of hedge funds led by Paul Singer that have been suing Argentina since its 2001 default. NML sued Argentina about a decade ago because the country has been paying some creditors and not others (not NML).
US Judge Thomas Griesa ruled Argentina was forbidden to do that, but the country has ignored that ruling and went into technical default last year.
Last month, Citibank — with its custody bank caught in the middle of this saga — asked special permission of Griesa to pay out Argentina’s creditors and then shut down its custody business in the country.
Unfortunately for Citi, Argentina didn’t want any of that.
As punishment, the Republic temporarily shut down Citi’s access to Argentine market, and raided the bank’s office on Monday.
“We’re presenting a precautionary measure so that our justice system can suspend the agreement between the vulture funds and Citibank,” said Kiciloff. “The agreement has no validity in Argentina. We hope that our Judiciary will act promptly in defence of Citi’s clients and the Argentine judicial system.”
Sounds like he’s taking this pretty personally. He also added that he believed Citi was extorted into doing the deal and that it “violated and interfered with regulations governing our public debt.”
From the legal documents, though, it doesn’t sound like that.
WHEREAS, in light of the unique concerns of the Argentine branch… a major international branch of Citibank with thousands of employees and banking operations in Argentina-with respect to Citibank Argentina’s obligations under Argentine law to process payments for its customers and the severe potential sanctions to which Citibank Argentina believes it might be subject should it not do so, and in light of Citibank’s desire to comply with any obligations that it may have under the Amended February 23,2012 Orders (the “Injunction”) and the March 12,2015 Opinion and Order, Citibank has decided to withdraw from the custody business in Argentina and/or cease to
provide custodial services for certain U.S. Dollar denominated bonds governed by Argentine law (“U.S. Dollar Argentine Law Exchange Bonds”) (the “Citibank Withdrawal”).
“Argentina, not Citi, has shown a complete disregard for the law by repeatedly attempting to make what a U.S. court has called “illegal payments” to… bondholders in violation of the injunction,” said a source familiar with the Court proceedings. “Argentina should immediately cease these flagrant violations of the law, stop with its lawless intimidation tactics, and meet with its creditors for settlement talks.”
Good, more talks.
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