Tags: Citigroup | Argentina | Custody Business | Bond Turmoil

Citigroup to Exit Argentina Custody Business Amid Bond Turmoil

Tuesday, 17 Mar 2015 01:04 PM


Citigroup Inc. said on Tuesday it plans to exit its custodial business in Argentina as soon as possible, after a U.S. judge refused to lift an injunction that blocked the bank from processing interest payments on $2.3 billion of Argentina bonds.

In a defeat for the bank, clients and Argentina itself, Citigroup said it made its decision in light of U.S. District Judge Thomas Griesa's March 12 order letting the injunction stand, and Argentina's renewed threats to strip its banking license and impose criminal, civil and administrative sanctions.

Citigroup has not decided how to exit the custody business, but may sell portions or end some customer relationships, according to a letter to Griesa from Citigroup's lawyer, Karen Wagner.

The New York-based bank said it will also keep trying to overturn Griesa's order, after the Manhattan judge on Monday rejected its request to set the order aside during the appeals process.

Argentina's economy ministry had no immediate comment.

Citigroup's decision may further complicate Argentina's efforts to pay its bondholders and return to global debt markets, more than 13 years after its 2001 default on roughly $100 billion of bonds.

Most investors holding Argentina bonds exchanged them for bonds worth much less, but a group of bondholder holdouts rejected the swaps.

These holdouts, including billionaire Paul Singer's Elliott Management LP hedge fund and its NML Capital affiliate, as well as the Aurelius Capital Management hedge fund, have insisted they be paid in full if holders of exchanged bonds are paid.

Argentine President Cristina Fernandez has long criticized the holdouts as "vultures," only to have Griesa issue a series of rulings in their favor over the last few years.

Citigroup, for its part, has portrayed itself as an innocent third party stuck with an untenable choice between ignoring Griesa's orders, or putting its Argentina banking license in jeopardy.

In his March 12 order, Griesa refused to let Citigroup process a $3.7 million interest payment due March 31 on bonds issued under Argentine law. He also said any third party that aids Argentina's payment process would violate his injunction.

Griesa expressed sympathy for the bank, but said Argentina's refusal to accept his decisions caused Citigroup's predicament.

He also again urged that Argentina work with court-appointed mediator Daniel Pollack to end its disputes with the holdouts.

Representatives for Elliott and Aurelius declined to comment on Tuesday. Pollack was not immediately available for comment.

In a statement, Citigroup tried to downplay its decision to quit the Argentina custody business, saying the custody business has "no meaningful connection with banking business in general," and concerns only servicing assets belonging to clients.

The case is NML Capital Ltd v. Argentina, U.S. District Court, Southern District of New York, No. 08-06978.

© 2017 Thomson/Reuters. All rights reserved.

 
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Citigroup Inc. said on Tuesday it plans to exit its custodial business in Argentina as soon as possible, after a U.S. judge refused to lift an injunction that blocked the bank from processing interest payments on $2.3 billion of Argentina bonds.
Citigroup, Argentina, Custody Business, Bond Turmoil
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2015-04-17
Tuesday, 17 Mar 2015 01:04 PM
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