Argentina deposits debt payment in defiance of U.S. court
BUENOS AIRES (Reuters) - Argentina deposited a $161 million bond interest payment with a newly appointed local trustee on Tuesday, the Economy Ministry said, defying a U.S. judge who held it in contempt a day earlier for taking illegal steps to meet its debt obligations.
The South American country wants to show it can service its debt and that its failure in July to complete a payment to holders of bonds that were restructured after its 2002 default was the result of adverse U.S. judicial rulings.
It was not clear how many bondholders would receive their coupon payments before the end of the Sept 30 deadline. As in July, a 30-day grace period is likely to be triggered after which the default, which has so far confined to Discount bonds, would spread to the Par series.
"By making this deposit, Argentina confirms once again its unshakeable commitment to meet its obligations to bondholders," the ministry said in a statement.
The central bank deposited the coupon payment on its foreign law Par bonds with the state-controlled Nacion Fideicomisos after the government removed the former trustee, Bank of New York Mellon Corp, in an attempt to skirt the U.S. court rulings.
Argentina's July default came after U.S. District Judge Thomas Griesa blocked an end-June coupon payment, ordering it pay in full a small group of U.S. hedge funds who rejected the terms of bond swaps in 2005 and 2010 before servicing its restructured debt.
The leftist government responded by enacting a new law allowing it to make payments locally in an attempt to keep the money beyond Griesa's reach.
In a rare move, Griesa on Monday held Argentina in contempt, and issued a warning that the government must stop trying to get around his rulings.
Huge question marks surround how Argentina will locate all holders of its debt across 15 separate bond series.
Financial intermediaries with a U.S. footprint would need to collaborate in the process of identifying bondholders but in doing so they too would risk violating Griesa's rulings.
Clearing houses including Clearstream Banking AG and Euroclear or other entities may be reluctant to divulge any information about who the bondholders are.
Euroclear declined to comment on whether it would process its clients' funds.
"This is about making a disbursement so that no one can say you did not want to pay," said Roberto Drimer, an economist at Buenos Aires-based consultancy VaTnet.
"Only a few will get paid. Most bondholders that could benefit from this payment method have opted to wait, rather than change jurisdictions," Drimer said.
Investors and fixed income traders say a default on the Par bond series will increase the risk of creditors demanding the accelerated payment of their bondholdings, which could leave the cash-strapped country facing claims of up to $30 billion.
(Additional reporting by Chris Vellacott in London; Writing by Richard Lough; Editing by W Simon)