Reuters: US Dollar Report: U.S. court ends claims on Argentina funds at N.Y. Fed

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U.S. court ends claims on Argentina funds at N.Y. Fed Mar 28th 2012, 20:49 Wed Mar 28, 2012 4:49pm EDT * Attachment on up to $2.21 bln funds lifted * Holdout creditors seek to seize Argentine assets * Judge condemns Argentine "intransigence" By Jonathan Stempel NEW YORK, March 28 (Reuters) - A U.S. judge threw out claims by bondholders on u p to $ 2.21 billion of Argentine funds held at the Federal Reserve Bank of New York, but cr iticized th e country's "continued intransigence" in refusing to pay creditors holding defaulted debt. Argentina defaulted on roughly $100 billion in debt during a 2001-02 economic crisis. It restructured about 92 percent of that through swaps in 2005 and 2010, but holdout creditors are still suing to recover the full value of their bonds. U.S. District Judge Thomas Griesa in Manhattan said on Wednesday that bondholders Aurelius Capital Partners LP a nd affiliates, as we ll as the investor Kenneth Dart's EM Ltd, failed to show the money hel d at the New York Fed could rightfully be used to s atisfy their claims. The holdouts, who have been awarded about $1.8 billion of judgments in 12 cases, won an order last August to freeze the funds, which were dep osited at the Fed in the accounts of Arg entina's central bank and Citibank. Griesa's decision vacates that order. "The funds are not the property of the Republic," Griesa said, adding that t he money was being held for "traditional central bank functions." Argentina, the central bank and Citibank argued that the money the bondholders had sought to seize -- which was earmarked for paying creditors holding Argentina's Boden 2012 bonds -- never even passed through the New York Fed and was transferred to creditors or their custodians in Argentina. In any case, Buenos Aires argued the funds ceased to belong to the country as soon as they were transferred over for payment to the Boden bondholders, an argument Griesa apparently backed. The Boden 12 bonds were first issued in 2002 and the country has made regular payments on them. Charles Platto, a lawyer for EM, declined to comment. A lawyer for Aurelius did not immediately respond to a request for comment. DECADE OF LITIGATION Argentina has faced a decade of U.S. litigation overseen by Griesa that arose from its default. This has hampered efforts by Latin America's third-largest economy to return to global capital markets. Griesa said that while "the law and the facts" compelled his conclusion, he urged Argentina to do a better job addressing claims of holders of its defaulted debt. "This is yet another situation growing out of the Republic's continued intransigence in failing to honor its lawful judgment debts," he wrote. "The plaintiffs in these cases, in seeking to vindicate their legal rights, are not able to do so by any regular and clear-cut devices." Griesa has granted several billion dollars in court judgments to holdout creditors. But so far, they have not been able to collect any money, because U.S. sovereign immunity laws protect most assets owned by a country abroad. Last July, a federal appeals court in New York ordered the lifting of a freeze on $100 million of Argentina central bank deposits in the United States. [I D:nN1E7640NE] It said U.S. law shields property of a foreign central bank used for traditional central banking activities, regardless of whether the bank is independent from its parent state. The 12 cases are all in the U.S. District Court, Southern District of New York. Among them are EM Ltd v. Argentina, No. 03-02507, and Aurelius Capital Partners LP et al v. Argentina, No. 07-02715. Link this Share this Digg this Email Reprints

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