A U.S. investment fund pressing for full repayment on Argentine debt is urging a U.S. judge to consider declaring Argentina in contempt after Buenos Aires announced plans to skirt court rulings that pushed it into default.
NML Capital Ltd is one of a group of plaintiffs known as holdout creditors who U.S. District Court Judge Thomas Griesa said must be paid in full if Argentina is to resume payments to other creditors who accepted to exchange debt for a fraction of face value.
In a letter to the judge filed late on Wednesday, NML Capital Ltd said the measures announced by Argentine President Cristina Fernandez on Tuesday were a "grave affront" on Griesa's ruling.
"The express purpose of these maneuvers is to render this court's orders a nullity," NML's lawyer Robert Cohen said.
Cohen's letter urged Griesa to hold an emergency hearing to address "whether this court should hold Argentina in contempt".
President Fernandez's government has sent a bill to Congress that would replace its New York intermediary bank with state-run Banco Nacion, which would be a way to resume payments to creditors who accepted restructured debt following Argentina's $100 billion debt default in 2002.
In June, Griesa blocked a $539 million coupon payment on the restructured debt deposited by Argentina at intermediary Bank of New York Mellon (BONY), saying it violated his order. Those funds are still held in limbo in BONY's account.
Latin America's No 3 economy then tipped into default on an estimated $29 billion in debt when negotiations with the New York hedge funds collapsed.
Griesa, who has presided over the decade-long legal battle between Argentina and the New York hedge funds, has already threatened Argentina with contempt for making public statements that it had honored its debt obligations.
"Argentina's proposed exchange would gut this court's injunctions by replacing financial institutions such as BONY that have refused to participate in Argentina's violations ... with Argentina's patsies that have no interest in abiding by the court's rulings," Cohen wrote