New York,--Citibank NA confirmed Monday that it would pull out of its Argentina custody business after being permitted by a US court to process two more payments on Argentine law exchange bonds.
The Citigroup unit said that a New York judge's ruling Friday that it could handle two more payments on the bonds, under its contract with Buenos Aires, would give it time to arrange the sale or closure of the custody business to avoid conflicts between US and Argentine laws.
"The custody business accounts for approximately two percent of Citi Argentina's net income and, by its very nature, is largely unconnected to the rest of Citi Argentina's banking activities," the bank said in a statement.
"Citi has been an important contributor to the Argentine economy for more than 100 years and looks forward to continuing to play this vital role in the decades to come."
On March 12, New York Judge Thomas Griesa prohibited Citibank from handling payments on Argentine bonds issued under Argentine law Thursday, adding a new challenge in the country's bitter debt fight with US hedge funds.
However, Argentina, which had argued that Griesa's court had no jurisdiction over the US dollar bonds issued in Argentina, insisted Citi was bound by Argentine law to continue processing the payments.
Citi then said that to avoid clashing jurisdictions it would pull out of the custody business altogether in Argentina.
But on Friday President Cristina Kirchner warned that banks operating in Argentina "must obey Argentine laws, just like in every country."
Griesa's ban on Citibank's processing of Argentine law debt tightened the avenues by which Buenos Aires can keep most of its creditors satisfied while it battles with two hedge funds and other small "holdout" creditors who refused to join the 2005 and 2010 restructuring of the country's defaulted debt.
The holdouts, led by hedge funds NML Capital and Aurelius Capital Management, want full payment on the bonds they hold, while most of the country's creditors accepted a huge writedown of their bonds after Buenos Aires defaulted on $100 billion in 2001.
Griesa has consistently supported the hedge funds' case, which Argentina has argued could undermine the restructuring agreements achieved for the bulk of its debt.
AFP
