* Court order to pay holdouts must be suspended - Argentina
* BNY Mellon, other third parties could face "extreme harm"
* Country says ruling could discourage N.Y. law debt issues
By Nate Raymond
Nov 27 Facing fears of another default,
Argentina on Tuesday urged a U.S. appeals court to suspend an
order requiring it to pay $1.3 billion to bondholders who
rejected two debt restructurings stemming from the country's
2002 financial crisis.
The emergency motion to the 2nd U.S. Circuit Court of
Appeals seeks to halt the effects of an order made by U.S.
District Judge Thomas Griesa in New York last week, requiring
Argentina to deposit the money in escrow by Dec. 15.
Argentina said the 2nd Circuit should delay the order while
the country pursues further appeals in the case, arguing that
Griesa's ruling would result in the "destruction" of its debt
restructuring and cause "extreme harm to numerous third
The South American country also said it could not legally
comply with Griesa's order under Argentine law, which prohibits
paying the holdout creditors on better terms than the
bondholders who accepted the 2005 and 2010 debt swaps.
Argentina also said it may not be able to service its debts
if Griesa's order remains in place.
"The order for an immediate escrow under these threats is
impossible to comply with and disregards the many third party
interests involved as well as the Republic's sovereignty,"
Argentina said in the motion.
Griesa's order, issued last Wednesday, caused worries among
the roughly 93 percent of bondholders who took heavy losses when
they agreed to swap their defaulted debt. They fear Argentina
might enter a "technical default" on $24 billion in restructured
The order also was a setback for Argentina's fiery President
Cristina Fernandez, who calls the holdout funds "vultures" and
has said she would never pay them.
The holdout creditors in this case include Elliott
Management Corp affiliate NML Capital Ltd and the Aurelius
Capital Management funds. Spokesmen for NML and Aurelius had no
immediate comment or did not respond to a request for comment
Griesa's order on Wednesday came in response to an Oct. 26
decision by the 2nd Circuit. The appeals court ruled then that
Argentina violated bond provisions requiring that it treat
bondholders equally when it paid the creditors who participated
in the debt swaps ahead of the holdouts.
RISK TO THIRD PARTIES
The 2nd Circuit sent the case back to Griesa to have him
address how the bond payment formula would work and determine
how the court's injunctions would apply to third parties, such
as Bank of New York Mellon Corp, which acts as trustee
for the exchange bondholders.
In its brief on Tuesday, Argentina said Griesa's order
failed to address the 2nd Circuit's concerns about how the
injunction would apply to third parties by "sweepingly" holding
that it must bind them.
"It is unprecedented - and unwarranted - to hold liable as
aiders and abettors participants in the financial markets doing
no more than carrying out their normal business functions and
fulfilling their own obligations to third parties," Argentina
said in the motion.
The country said it would be "manifestly unreasonable" to
apply the injunction to BNY Mellon. Once funds are transferred
to BNY Mellon, Argentina said they are no longer the country's
property and belong exclusively to the exchange bondholders.
Argentina also said allowing the order to remain standing
would "both hugely impair the use of New York law to govern
sovereign and corporate issuances and severely disadvantage New
York financial institutions with respect to such issuances."
A spokesman for BNY Mellon did not immediately respond to a
request for comment. The bank has said it does not believe it
should be bound by the injunction.
A group of exchange bondholders on Monday filed a separate
motion backing Argentina in seeking a halt to Griesa's order.
Argentina said those bondholders "could not have anticipated
"Had the exchange bondholders remotely understood that their
contracts supported this extraordinary result, no one would have
entered into an exchange offer in the first place," Argentina
The case is NML Capital Ltd et al v. Argentina, 2nd U.S.
Circuit Court of Appeals, No. 12-105.