(Updates with letter to judge in third paragraph.)
Aug. 20 (Bloomberg) -- Holders of defaulted Argentine bonds asked a U.S. judge to consider contempt sanctions against the South American nation after it announced a plan to pay its performing debt outside his jurisdiction, calling it a “grave affront” to the court.
Argentine President Cristina Fernandez de Kirchner yesterday said the government plans to pay its foreign debt locally, to avoid complying with orders by U.S. District Judge Thomas Griesa in Manhattan that require it to pay Paul Singer’s NML Capital and the other holdouts more than $1.5 billion before it can pay holders of its restructured debt.
“This plan makes no pretense that Argentina will honor its obligations under plaintiffs’ bonds,” Robert A. Cohen, a lawyer for the holdouts, said in a letter today to Griesa.
The defaulted bondholders asked that Griesa hold an emergency hearing to consider Argentina’s violation of his orders and whether to hold the nation in contempt. Griesa has made clear that a plan to exchange the debt for bonds paid in Argentina would be illegal.
Argentina defaulted on a record $95 billion of debt in 2001. Holders of about 92 percent of the debt agreed to exchange their bonds for new ones, at a loss of about 70 percent, in debt restructurings in 2005 and 2010. Holdouts including NML Capital sued, seeking full payment.
In June, Griesa blocked Bank of New York Mellon Corp., the indenture trustee for Argentina’s restructured debt, and other intermediaries from distributing $539 million Argentina intended for bondholders.
Standard & Poor’s declared Argentina in default on the restructured bonds on July 30 after the government failed to make an interest payment as a result of Griesa’s order.
The case is NML Capital Ltd. v. Republic of Argentina, 08- cv-06978, U.S. District Court, Southern District of New York (Manhattan).