Citibank's fears of imminent disaster in Argentina have been averted — at least until the end of December.
Manhattan federal judge Thomas Griesa on Friday agreed to stay his earlier order that would have prevented the bank from making Sept. 30 payments on Argentina's bonds.
Citibank said withholding the money would violate Argentine law and could lead the bank to lose its license in the South American country. Citi has been in Argentina for more than 100 years and has a vast retail banking presence there.
The dispute over $8 billion of Argentine local law bonds is just part of the complex battle raging between Argentina and a holdout group of creditors led by Paul Singer.
Argentina's refusal to pay the Singer group after exhausting its legal avenues in the US has led the country to default on a much bigger group of bonds. To get around the US courts, the country passed a law that will allow those bondholders to exchange their debt for local bonds.
Letting Citi's local Argentine law bonds off the hook "would open the door for Argentina to seek other evasions," said Ted Olson, Singer's lead lawyer and a former solicitor general.
Griesa said he was not concerned about repercussions — only the law. While he stopped short of lifting his injunction against Citi, he seemed to be having second thoughts about his earlier order.
"There was not the kind of full briefing we're having now," said Griesa.
His remark came after Citibank lawyer Karen Wagner detailed why the Argentine law bonds should be exempt from his broad order forcing Argentina to pay the Singer group each time it makes payments to exchange bondholders.
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