MercoPress. South Atlantic News Agency

Argentina again requests stay ruling from Judge Griesa to pay restructured bondholders

Griesa meets on Tuesday with financial institutions to clarify how to enforce ruling requiring payment to restructured bondholders in Euros and sterling.

Argentina asked U.S. judge Thomas Griesa on Monday to put on hold an order requiring it to pay bondholders who did not participate in debt restructurings following the country's 2002 default, while it seeks a “global resolution.”

Ahead of a July 30 deadline to reach a deal or face a new default, Argentina filed papers asking the New York federal judge to stay a ruling that it pay the holdout investors 1.33 billion plus interest.

Argentina's lawyers in New York who have been in settlement talks, said any deal must take into account other bondholders and factor in a RUFO clause (Right under final offer) in its restructured bonds that could open it up to further liability.

“As those risks remain, so does the necessity and appropriateness of a stay,” Argentina's lawyers wrote.

The request is not the first time Argentina has asked for a stay, which U.S. District Judge Griesa has previously denied.

Argentina separately filed a notice of appeal of a June 20 ruling by Griesa that prevented it from going through with a proposal by the country's economy minister to swap bonds governed by New York law for those under local jurisdiction.

On Tuesday, Griesa is expected to hear a range of requests by Argentina, bondholders and financial institutions over how to enforce his ruling requiring payment to restructured bondholders in Euros and sterling. European and US banks are requesting clarification as to whether they can pay restructured Argentine bond holders with contracts in Europe.

Earlier this month, the JP Morgan Bank also requested a written explanation following the “unusual” ruling by Griesa which prevents bondholders from receiving the funds.

The payment to the holdouts, led by Elliott Management's NML Capital Ltd and Aurelius Capital Management, has to be made effective, under a pari passu ruling, at the time of Argentina's next payment to the 93% of its creditors who participated in debt swaps in 2005 and 2010 following the country's 100 billion default.

Argentina last month attempted to make a 539 million payment to the restructured bondholders due June 30. But Griesa deemed it a violation of his order and told Bank of New York Mellon Corp to return the money.

A 30-day grace period is now in effect before a default can be declared on July 30.

In Monday's court filing, Argentina renewed arguments that the holdouts should not be allowed to put at risk its prior restructurings.

The country's lawyers said any deal needed to resolve not just claims by the plaintiffs but also those of other holdout creditors. Holdout creditor claims total as much as 20 billion globally, Argentina said.

Argentina argued any resolution must also be consistent with a clause in the restructured bonds' contracts that would open it up to billions of dollars in additional claims if triggered before it expires at the end of this year.

Argentina said it continues to participate in settlement talks before a court-appointed mediator, Daniel Pollack. “But that process must take into account these legal and factual constraints,” Argentina's lawyers wrote.

The conclave will take place at the District Court of New York at 10.30am.

In related news from Buenos Aires, Jorge Brito, president of Macro Bank and of the Association of Argentine banks anticipated that is no agreement is reached by 30 July with the holdouts, “nothing catastrophic will happen because markets are playing in favor of Argentina”.

However Brito admitted that making speeches or telling the holdouts that Argentine will not pay them is not positive. “It's a simple matter: you go the judge and tell him what your situation is, and if the judge is coherent he will understand, certainly not if you insult him”, said Brito.

And if no agreement is reached by 30 July, “nothing catastrophic is going to happen. It won't be cheap whatever is decided but markets are playing in favor of Argentina, and they are doing so because they expect a change in 2015” when Cristina Fernandez steps down.

Brito also pointed out that there is no chance of a 'stay' by Judge Griesa as demanded by Argentina, unless the holdout bond holders agree.

The president of the Argentine bankers association anticipated that the Argentine economy is in recession, and will close with a negative growth of 2% in 2014 but next year will recover and overdo 1.5% growth, with strong investment expectations as the chances of a change of policy with a new government, or even before, will offer a completely different climate.