NY judge finds no exception for Citibank's branch in Argentina in dispute over bonds

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NEW YORK — Citibank cannot let its branch in Argentina process payments by the South American country to bondholders unless U.S. bondholders are paid as well, a judge said Thursday.

U.S. District Judge Thomas Griesa's written ruling came in the ongoing dispute stemming from Argentina's default in 2001 on $100 billion of debt.

The judge has repeatedly ruled that U.S. hedge funds must be paid roughly $1.5 billion they are owed if Argentina pays interest to other bondholders who swapped their bonds for bonds worth less than a third of their original value. The swaps occurred in 2005 and 2010 after Argentina defaulted. Fewer than 10 percent of bondholders failed to swap their bonds.

Griesa heard lawyers for the bank and Argentina last week argue that the branch bonds were local and should not be subject to his rulings.

But Griesa said overwhelming evidence showed that the bonds flowing through Citibank were marketed around the world, even if they are now processed in Argentina.

The judge also urged Argentina to return to the bargaining table to negotiate a final solution to the bond dispute.

Lawyers did not immediately respond with comment.

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