By Nicole Hong
A U.S. federal judge on Friday said a payment Argentina
deposited in an attempt to pay holders of the country's
restructured debt was illegal.
At a hearing, a lawyer for Bank of New York Mellon Corp. said
the government of Argentina on Thursday deposited $539 million in
both dollars and euros. The lawyer said BNY was aware of court
orders that barred payment to holders of restructured bonds and
that the money remains in the account.
U.S. District Judge Thomas Griesa said anyone who attempts to
pay these bondholders would be held in contempt of court. Judge
Griesa has ruled that Argentina must compensate a small group of
holdout creditors at the same time it pays investors who exchanged
defaulted bonds for heavily discounted new debt.
"I will enter whatever order necessary to nullify this reported
payment" by Argentina, Judge Griesa said at the hearing.
Judge Griesa said payments on local-law bonds, debt that is
governed by laws in Argentina, are allowed.
On Thursday, the court struck down Argentina's request for more
time to negotiate with the holdout creditors, prompting the
country's Economy Minister Axel Kicillof to accuse Judge Griesa of
trying to push Argentina into its second default in 13 years.
Argentina defaulted on about $100 billion of debt in 2001. The
country later offered holders of the defaulted bonds new securities
valued at about 33 cents on the dollar. Between the two swaps,
investors agreed to exchange almost 93% of the defaulted bonds.
But a small minority of bondholders, including NML Capital and
Aurelius, opted not to restructure their bonds and instead sued for
full repayment. The holdouts have won about $1.5 billion in court
awards in the case now before Judge Griesa.
Write to Nicole Hong at nicole.hong@wsj.com