March 17, 2015 12:05 p.m. ET
Citibank said Tuesday it will exit the custody business in Argentina, following a ruling by a U.S. court preventing it from passing on interest payments from the South American country to local bondholders.
In a letter to U.S. District Judge Thomas Griesa, the law firm representing Citibank said the bank would exit the business because of the court’s decision last week. It also cited threats from Argentina to strip Citibank of its banking license and impose criminal, civil and administrative sanctions.
“Citibank has determined to have its Argentine branch, Citibank Argentina, develop, and execute, a plan to exit the custody business in Argentina as soon as possible,” the letter said. “The precise manner by which Citibank Argentina will exit the custody business has yet to be finally determined, but it may include the sale of certain portions of the custody business or termination of account relationships with notice to its customers.”
- Judge Bars Citigroup From Passing Payments to Argentina Bondholders (March 12)
- Plan to Sell Argentine Debt Collapses (Feb. 26)
On Thursday, Judge Griesa rejected Citibank’s arguments allowing it to pay holders of Argentina’s local-law bonds on March 31. Judge Griesa’s decision was based on a 2012 ruling that prohibits financial institutions from assisting Argentina in servicing its current debt without also paying hedge funds that have sued the country.
The hedge funds, led by Elliott Management Corp.’s NML Capital Ltd. and Aurelius Capital Management LP, are seeking the full repayment on Argentina’s defaulted bonds, which they still hold.
Write to Ryan Dube at firstname.lastname@example.org
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