A US judge said today that a deposit from Argentina towards paying off restructured debt was illegal unless hedge funds holding 1.3 billion USD in bonds were also paid.
Judge Thomas Griesa warned Buenos Aires that any further such payment attempts would put it in contempt, and said the 539 million USD sitting in an account of Bank of New York Mellon should be returned.
He told the Republic to expedite negotiations to settle with the hedge funds, who held out from joining the 2005 and 2010 restructuring of Argentina's defaulted debt.
Griesa has ordered Argentina to pay both the holdouts, NML Capital and Aurelius Management, and holders of the restructured bonds at the same time, by a June 30 deadline.
He stressed that banks processing the payments are forbidden to pay one without the other.
"It cannot be done and will not be permitted by this court. Therefore this payment cannot be made and anybody who attempts to make it will be in contempt of court," the federal judge told a Manhattan court hearing.
Griesa had yesterday refused to freeze an order for Argentina to pay holdouts the 1.3 billion USD value of their bonds.
Argentina then pledged to make good on its debts and deposited 832 million USD in an Argentine account of a US bank, enough to cover the principal and interest payments for the restructured bond holders scheduled for Monday.
Griesa today called on the parties to continue with negotiations and told lawyers for Argentina that its request to stay the June 30 payment deadline had not been made appropriately.
Recognizing there was no prospect of a deal before June 30, he suggested it should not make a difference as long as talks progress under the oversight of the court-appointed "special master", New York lawyer Daniel Pollack
"If you had continued discussions with the special master you could have solved all the problems you are talking about," Griesa told Argentina's lawyer Carmine Boccuzzi.
"You are bringing up legitimate points but the thing is how to resolve them without such explosive action as has been taken by the Republic here," he added.
