Bank of New York Mellon Corp. must return a $539 million deposit from Argentina intended for restructured bondholders, a U.S. judge ruled, calling the transfer an “explosive action” that disrupted potential settlement talks with holders of defaulted debt.
U.S. District Judge Thomas Griesa in New York has ruled that Argentina can’t pay holders of its restructured debt without also paying more than $1.5 billion to a group of defaulted bondholders, raising the possibility of a new default as the South American nation approaches a June 30 payment deadline.
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“This payment is illegal and will not be made,” Griesa said today at a hearing in
Manhattan federal court. He warned that any attempt to pay restructured bondholders would be in contempt of court.
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Eric Shaffer, a lawyer for the bank, told Griesa the bank remains in compliance with his orders as it hasn’t passed Argentina’s money along to clearinghouses for payment to restructured bondholders.
“Your bank didn’t do anything wrong,” Griesa told Shaffer.
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Carlos Abadi, chief executive officer of New York-based investment bank ACGM Inc., said in an e-mail that Argentina knew BNY Mellon was barred from distributing the $539 million to bondholders before it made the deposit.
“It’s not clear why they would put up such a show and waste precious time,” Abadi said. “It’s going to be incredibly complex to reach a comprehensive deal by July 30th and this sideshow makes the goal even harder.”