Leave us out of it!
Caught in a legal crossfire, Bank of New York Mellon is arguing that it should not be forced to help Paul Singer’s Elliott Management collect as much as $1.3 billion from Argentina.
An appeals court recently upheld a ruling requiring Argentina to pay the New York hedge fund each time it pays other bondholders, which, unlike Elliott, agreed to a debt restructuring several years ago.
Judge Thomas Griesa ruled that all agents of Argentina are also bound by the order, and Elliott named Bank of New York as one of them.
As trustee, BoNY is responsible for making Argentina’s payments to investors who agreed to the restructuring. But the bank will argue that it is not an agent of Argentina and has an “arms-length” relationship with the country in a brief it plans to file later today, sources told The Post.
BoNY will argue that its sole responsibility is to the vast majority of bondholders who agreed to take a haircut after Argentina defaulted on $100 billion of debt in 2002. The bank receives payments from Argentina and holds that money in trust for those investors.
Argentina has rejected the court order and insists it will not pay Elliott, which is demanding to be repaid in full. At the same time, the country said it will continue to pay the other bondholders.
Nonetheless, those bonds have tanked since the appeals court ruled in Elliott’s favor on fears that the court would tie BoNY’s hands. If BoNY were unable to pay those bondholders without violating a court order, Argentina could be forced into a second default.
More than $3 billion in payments to those bondholders is due in December, unless Argentina’s stay is extended beyond then.
To pay Elliott, Griesa suggested BoNY take money out of funds slated for the exchange bondholders to pay Elliott.
“Some money is due to the plaintiffs out of those December payments,” Griesa said during a court hearing last week.
As a result, those bond investors are also lining up to oppose the order. Brevan Howard, the powerful UK hedge fund, and MFS Investment Management, a big Massachusetts money manager, have joined with hedge fund Gramercy in opposing the order, The Post has learned.
“Exchange bondholders not only are not getting adequate time, but their property is being taken unlawfully,” said Sean O’Shea, the attorney for these investors, who collectively own more than $1 billion worth of Argentinan bonds.
The prominent law firm of David Boies has teamed with O’Shea to represent these bondholders, and more institutions are expect to file briefs with the court next week to oppose the order.
mcelarier@nypost.com
BoNY wants out of Elliott’s battle with Argentina
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BoNY wants out of Elliott’s battle with Argentina
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BoNY wants out of Elliott’s battle with Argentina
