In a letter to New York Judge Thomas Griesa, lawyers for Deutsche Bank said they were tired of being subpoenaed by the hedge funds suing Argentina.
“It is now evident that subpoenas being issued by NML, Aurelius and others are less in an effort to obtain information to locate and ultimately seize attachable assets of the Republic, and more a tool under the auspices of the Court to punish entities… that are identified in having played a role in financial transactions with the Republic…” it said.
In other words, stop bullying us.
On top of “harassment,” Deutsche Bank also accuses NML of leaking confidential Court documents.
For over a decade these hedge funds — known collectively as NML and led by hedge fund billionaire Paul Singer — have been suing Argentina over $US1.7 billion in debt dating back to the country’s 2001 default. Argentina refused to pay them unless they took a massive haircut on their debt like most shareholders.
Last year the Supreme Court upheld an order that Argentina must pay these creditors or no one. At least, no one holding bonds sold on the international market and considered “external indebtedness”.
Argentina still refused and went into technical default.
There was another, less often discussed part of the Court order that is very key here. NML is allowed to scour the world for Argentine assets that it could potentially seize. That’s what Deutsche Bank referenced in its letter.
“It’s fitting that Deutsche Bank, an institution that has what regulators describe as ‘cultural failings’ and was recently hit with a $US2.5 billion fine over the Libor scandal, is now attempting to avoid answering a subpoena regarding its involvement with the government of Argentina, an international scofflaw,” said a source familiar with NML’s situation.
Back in February Deutsche Bank and JP Morgan “suspended” an attempt to issue Argentine bonds on the international market, but not before sending around an intense “buyer beware” letter to investors.
“…no investor will have any claim and the Sellers will have no liability based on: (i) any difference the purchase price and any subsequent value of the Securities; (ii) the ability of any investor to receive any interest or redemption payment to cover the principle amount of the Securities; or (ii) any circumstances beyond the Sellers control, included where the Securities are not admitted to a relevant clearing system or otherwise delivered,” it said.
You can see why that sale may not have been a huge hit.
Then in April Argentina tried to sell some Bonar 2024 bonds locally, and Deutsche Bank’s Argentina branch made bids on those for clients in London, according to Deutsche Bank’s letter.
NML sees that sale to London clients as external debt. It told the Court that Deutsche Bank managed the sale, and then asked that the Court to include those bonds among those Argentina cannot pay until it pays NML.
“Mr. Kicillof likes [Argentina’s Economy Minister] to brag that the recent BONAR 24 offering was international. We agree. That makes those bonds subject to our pari passu covenant. The hedge funds that piled into these richly priced bonds did so with eyes wide open,” said Aurelius Chairman Mark Brodsky in a statement emailed to media after the sale.