By Nate Raymond
NEW YORK (Reuters) - A U.S. appeals court on Friday dismissed an appeal by CITIGROUP (C.NY)Inc
The 2nd U.S. Circuit Court of Appeals in New York in a brief order declined to find it had jurisdiction, because the order Citigroup and Argentina appealed over was a "clarification, not a modification" of a prior decision by U.S. District Judge Thomas Griesa.
But the appellate court, ruling a day after hearing the appeal, said nothing in its decision was intended to prevent Citigroup from seeking further relief from Griesa.
Karen Wagner, Citigroup's lawyer, told the appeals court Thursday that the bank faces regulatory and criminal sanctions by Argentina, which defaulted again in July, if it cannot process the $5 million payment by Sept. 30.
Argentina had also sought reversal. But some of the three-judge panel during Thursday's arguments questioned why they should consider its position since the country was taking steps to avoid complying with orders it pay $1.33 billion plus interest to creditors suing for full payment on defaulted bonds.
Argentina defaulted in July after refusing to honor a court order to pay bondholders led by Elliott Management's NML Capital Ltd and Aurelius Capital Management.
The hedge funds had spurned the country's 2005 and 2010 debt restructurings, which resulted in exchanges for about 92 percent of the country's defaulted debt. Investors who accepted Argentina's terms on average were paid less than 30 cents on the dollar.
The country's most recent default came after the U.S. Supreme Court declined to hear Argentina's appeal of a lower court ruling that it must pay the holdouts at the same time it paid holders of the exchange bonds.
U.S. District Judge Thomas Griesa, who has for years overseen the Argentine bond litigation, subsequently blocked Bank of New York Mellon Corp from processing a $539 million interest payment on what the country says is over $28 billion in restructured debt.
The order sent Argentina on a course to default after it failed to reach an agreement with the holdouts.
Amid the litigation, Citigroup sought Griesa's assurances it could process any payments it received from the country on bonds issued under Argentine law.
Griesa initially ruled for Citigroup, which has a branch in Argentina, but on July 28 reversed course, blocking future payments by the country on U.S. dollar-denominated bonds issued under Argentine law.
A Citigroup spokeswoman had no immediate comment. A U.S. lawyer for Argentina did not respond to a request for comment, while a spokesman for NML declined comment.
(Reporting by Nate Raymond in New York; additional reporting by Jonathan Stempel and David Henry; Editing by Meredith Mazzilli and Andrew Hay)
