By Ken Parks
BUENOS AIRES--Argentina has revoked Bank of New York Mellon's
permission to operate a local representative office after the bank,
acting as a trustee of some Argentine bonds, refused to transfer
interest payments owed to bondholders last month due to a U.S.
court order.
"The Superintendency of Financial and Foreign Exchange
Institutions has revoked the authorization for the representation
of Bank of New York in Argentina," Cabinet Chief Jorge Capitanich
told reporters Tuesday morning.
In a statement, the central bank justified its decision to
revoke BNY Mellon's authorization to operate a representative
office because the U.S.-based bank hadn't provided credit and other
financial services to Argentine residents since the end of
2012.
A spokesman for BNY Mellon declined to comment. A person
familiar with the matter said the bank's representative office is
unrelated to its trustee contract with the Argentine
government.
Argentine President Cristina Kirchner's government is already
seeking to remove BNY Mellon as the trustee of its bonds governed
by U.S. and U.K. law through a bill submitted to Congress last
week.
Argentina defaulted last month for the second time in almost 13
years when investors didn't receive $539 million in interest
payments due on July 30.
Argentina deposited the money on time in BNY Mellon's accounts
at the central bank, but U.S. District Judge Thomas Griesa blocked
its distribution to bondholders after Argentina ignored his ruling
to pay a small group of hedge funds that sued to collect on debt
the country repudiated in 2001. The default could eventually affect
almost $29 billion in Argentine debt issued overseas.
Investors who own EUR1.3 billion ($1.71 billion) of Argentine
government bonds affected by Judge Griesa's order are suing BNY
Mellon in the U.K. to gain access to the interest payments they are
owed.
Under legislation sponsored by the Kirchner administration,
state-run bank Banco de la Nacion would take over as trustee and
future interest payments would be made in Argentina if bondholders
approve those measures. The bill would also allow investors to
exchange their Argentine bonds issued under the laws of other
countries for local law bonds.
Analysts say the bill is an attempt to side step Judge Griesa's
ruling, a potentially risky strategy that could see the judge find
Argentina in contempt. With Mrs. Kirchner's ruling coalition
holding majorities in both houses of Congress, the bill is expected
to be passed and signed into law before Argentina's next interest
payment is due on Sept. 30.
Argentina's latest default stems from its decision to repudiate
about $100 billion in debt during a deep economic crisis in
2001.
Investors eventually exchanged almost 93% of their defaulted
bonds for new securities in heavily discounted restructurings in
2005 and 2010 that gave them around 33 cents on the dollar. But
some creditors held out for a better deal and sued for full
repayment.
In 2012, Judge Griesa ordered Argentina to treat its creditors
equally in a case involving hedge funds led by Elliott Management
Corp.'s NML Capital Ltd. and Aurelius Capital Management LP. That
ruling was upheld by the Second Circuit Court of Appeals and the
U.S. Supreme Court in June declined to hear Argentina's appeal.
Last week, Mrs. Kirchner offered holdouts another chance to
restructure their defaulted bonds on the same terms as the 2010
debt exchange. NML and Aurelius, which have won about $1.6 billion
after years of litigation, have said the terms of that debt swap
are unacceptable.
Nicole Hong and Matt Wirz contributed to this article.
Write to Ken Parks at ken.parks@wsj.com