Citibank: Caught between a rock and a hard place...(Argentina and Court Order)
Citibank N.A. faces "grave sanctions" from Argentina unless it fails to obey U.S. District Judge Thomas Griesa's order blocking it from making payments to holders of $8.4 billion of the country's bonds. The Judge barred Citibank's Argentina branch from forwarding a $5 million interest payment due September 30, 2014 to the bondholders if Argentina continues to refuse to make payments on its defaulted debt.
Citibank claims that the branch and its executives face possible criminal and civil penalties, including the loss of its banking license and takeover by Argentina.
Griesa's July 28, 2014 order is one in a series barring Argentina from making payments on its performing debt unless it also pays $1.5 billion to a group led by Paul Singer's NML Capital that owns its defaulted bonds. Argentina's refusal to make that payment triggered a July 30, 2014 default when it was blocked from making a $539 million interest payment on its restructured debt.
A three-judge panel of the appeals court is scheduled to hear the bank's request to overturn Griesa's order and permit it to make payments on the U.S. dollar bonds, which are payable in Argentina and issued under local law.
The court granted a fast-track hearing of the Citibank appeal before the Sept. 30 payment deadline. Last week, Griesa denied an NML request that Citigroup be forced to give evidence Argentina is "coercing and pressuring" it to violate his order. Griesa said he wouldn't rule on the subpoena while the bank's appeal is being considered by the appeals court.