Citibank announced on Tuesday that it will no longer make bond payments to Argentina and plans to eventually transfer debt payments elsewhere due to “unprecedented international conflict of laws,” according to the Associated Press.
The statement comes after the March 12 ruling by U.S. District Judge Thomas P. Griesa that reaffirmed his previous decision that Citibank cannot process interest payments on Argentine bonds. In response, Argentina threatened to rescind Citibank’s operating license.
In its statement on Tuesday, Citibank is planning to “develop and execute a plan to exit the custody business in Argentina as soon as possible.”
The dispute originated 14 years ago after Argentina defaulted on $100 billion of debt. While many bondholders made deals in exchange for discounted exchange notes, a group of U.S. hedge funds sought full payment.
Last summer, Griesa ruled in favor of the hedge funds—which include Elliott Management’s NML Capital Ltd. and Aurelius Capital Management LP—and blocked all interest payments on Argentine debt. The ruling ultimately caused Argentina to again default on July 31. Earlier this month, Argentina unsuccessfully argued that Citibank should not be included in last summer’s ruling.
Founded in Argentina in 1914, Citibank is present in 25 Argentine cities and offers a broad range of financial services and product. Argentina’s profile, from a business perspective, has long been considered rocky at best, but it began to worsen rapidly again last year and has yet to stabilize. Along with frequent stories of corruption, unrest and growing anti-U.S. sentiment, Argentina’s reputation has also dealt with credit rating agency outlook downgrades and, more recently, a dubious positioning among the worst three nations in Bloomberg’s annual “misery index” study.
Kevin Hebner, senior FX Strategist at JPMorgan Chase Bank, said while serving as an instructor during the inaugural year of NACM's Graduate School of Credit and Financial Management International (GSCFMI) in 2014 that Argentina has become viewed by many in credit and business in the same negative way as struggling parts of the Middle East and Eastern Europe. At least in the near term, “there’s no reason to believe things will get better,” said Hebner, who will speak at GSCFMI again this year in June.
- Jennifer Lehman, NACM marketing and communications associate
For more information on Hebner’s classes and others at the 2015 session of NACM’s Graduate School of Credit and Financial Management International, or to register, visit https://www.nacm.org/gscfm-international.html.