Bank of New York Mellon Still Has Argentina Payment Money

By Dow Jones Business News, 
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By Saabira Chaudhuri and Nicole Hong

Bank of New York Mellon Corp. on Thursday said it is continuing to keep the money deposited by Argentina in June to pay certain bondholders, after a U.S. District Court ruling has ruled that BNY is not allowed to transfer the money to bondholders until Argentina pays its holdout creditors.

The trust bank said it hasn't received a court order to return the money.

Argentina's talks with its bondholders collapsed late Wednesday, leaving the nation on the brink of its second default in 13 years. Argentina has been embroiled in a yearslong battle with a small group of hedge funds that have demanded full payment for bonds the country defaulted on in 2001. Argentina has refused to pay, despite an order by a U.S. District Court Judge Thomas Griesa requiring it to pay the hedge funds. The issue came to a head Wednesday as Argentina missed a deadline to make a payment it owed to other bondholders, because the court order had prevented such a move

On June 26, Argentina deposited $539 million at BNY Mellon for an interest payment on restructured bonds governed by U.S. and U.K. law. Judge Griesa has since said the deposit was illegal because U.S. courts have ruled that Argentina cannot pay restructured bondholders until it compensates holdout creditors. Holders of the U.K., Argentine and Japanese law bonds have argued their debt falls outside the scope of Judge Griesa's rulings.

At the start of July, the holdout creditors filed an order to compel BNY Mellon to return the money to Argentina. BNY Mellon in turn filed a motion asking that it be allowed to keep the money to prevent exposing the bank to lawsuits from bondholders. The court hasn't yet ruled on that motion, says BNY Mellon.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and Nicole Hong at nicole.hong@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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