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.
But the bank, which is trustee for the restructured bondholders, said that it is not an agent of Argentina and has an “arms-length” relationship with the country in court papers filed yesterday.
BoNY said 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 insisted it will not pay Elliott — and that it will continue to pay the other bondholders. If BoNY were unable to pay those bondholders without violating a court order, Argentina could be forced into a second default.
The long-running battle between Argentina and Elliott has gained urgency because more than $3 billion in payments to those bondholders is due in December.
To pay Elliott, Griesa suggested BoNY take money out of funds slated for the exchange bondholders. “Some money is due to the plaintiffs out of those December payments,” Griesa said on Nov. 9.
Now 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 the investors.
The prominent law firm of David Boies has teamed with O’Shea to represent these bondholders.