By Dow Jones Business News,
June 27, 2014, 12:38:00 PM EDT
By Nicole Hong
A U.S. federal judge on Friday said a payment Argentina deposited in an attempt to pay holders of the country's
restructured debt was illegal.
At a hearing, a lawyer for Bank of New York Mellon Corp. said the government of Argentina on Thursday deposited $
539 million in both dollars and euros. The lawyer said BNY was aware of court orders that barred payment to holders of
restructured bonds and that the money remains in the account.
U.S. District Judge Thomas Griesa said anyone who attempts to pay these bondholders would be held in contempt of
court. Judge Griesa has ruled that Argentina must compensate a small group of holdout creditors at the same time it pays
investors who exchanged defaulted bonds for heavily discounted new debt.
"I will enter whatever order necessary to nullify this reported payment" by Argentina, Judge Griesa said at the
Judge Griesa said payments on local-law bonds, debt that is governed by laws in Argentina, are allowed.
On Thursday, the court struck down Argentina's request for more time to negotiate with the holdout creditors,
prompting the country's Economy Minister Axel Kicillof to accuse Judge Griesa of trying to push Argentina into its
second default in 13 years.
Argentina defaulted on about $100 billion of debt in 2001. The country later offered holders of the defaulted bonds
new securities valued at about 33 cents on the dollar. Between the two swaps, investors agreed to exchange almost 93% of
the defaulted bonds.
But a small minority of bondholders, including NML Capital and Aurelius, opted not to restructure their bonds and
instead sued for full repayment. The holdouts have won about $1.5 billion in court awards in the case now before Judge
Write to Nicole Hong at firstname.lastname@example.org
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