| BUENOS AIRES
BUENOS AIRES Aug 6 The U.S. judge in charge of
Argentina's debt default case on Wednesday ordered Bank of New
York Mellon to hold on to money deposited by the government
rather than disburse the funds to holders of the country's
The move by U.S. District Judge Thomas Griesa came after
Argentina earlier in the day demanded the intermediary bank
deliver $539 million in bond payments that were due in June but
blocked by previous court rulings.
Argentina defaulted on its sovereign bonds last week after
losing a long legal battle with hedge funds that rejected the
terms of debt restructurings in 2005 and 2010.
The government has kept up pressure on Bank of New York
Mellon to make payouts to the holders of restructured bonds
despite Griesa's order saying it has to pay the holdout hedge
funds at the same time. The holdouts are asking for repayment of
100 cents on the dollar rather than accept steep discounts
offered in Argentina's two restructurings.
"The Republic will seek to hold BNY Mellon liable for any
damages the Republic has suffered and may suffer as a result of
BNY Mellon's acts and omissions," the government said in a
letter to the bank on Wednesday.
"BNY Mellon has placed its interests, and those of
the plaintiffs ... over those of the Exchange Bondholders, in
violation of BNY's duties as Trustee," the letter said.
Griesa disagreed, saying it was illegal for Argentina to
deposit money intended for the exchange bondholders and ordered
the bank to hold the funds.
"Argentina will take no steps to interfere with BNY's
retention of the funds," Griesa's order said.
The inflation-racked South American country defaulted on
about $100 billion on sovereign bonds in 2002. Most holders of
those bonds accepted less than 30 cents on the dollar in the
2005 and 2010 restructurings while the holdouts opted to sue in
the U.S. courts for full repayment.
The case has turned into a bitter legal feud between the
populist government of Argentina and the holdouts, derided by
Buenos Aires as vultures circling the carcass of Argentina's
traumatic 2002 debt crisis.
Griesa stepped in on Monday to defend the mediator he
appointed to help settle the dispute after Argentina accused the
go-between of bias.
The country's gross domestic product, meanwhile, is expected
to shrink this year, according to the United Nation's body for
Latin America, as fallout from the debt crisis keeps the
region's No. 3 economy out of foreign debt markets.
(Writing by Hugh Bronstein; Editing by Ken Wills)