Due to "unprecedented international conflict of laws", the New York-based bank said it plans to transfer the debt payments to another entity and had further notified the New York court which is overseeing the legal battle.
Citibank was ordered by the US District Judge Thomas Griesa to stop processing payments to bondholders, according to media sources.
The move prompted Argentina to issue a threat to strip the bank’s operating license and impose criminal administrative sanctions if it refused to process those payments.
The bank has requested Griesa to put his order on hold as it prepares to exit the custody business.
The latest dispute arises from Argentina’s default that took place in 2001 on debt worth about $100bn.
While most of the bondholders agreed to debt-swap deals, a group of investors led by Paul Singer’s Elliott Management and its NML Capital affiliate, demanded full payment and took the case to court.
Griesa, in order dated 12 March, ordered Citi not to process interest payment of $3.7m which is due 31 March on bonds that are issued under Argentine law.
Citibank’s decision to stay away from its custodial business is expected to hinder the government’s efforts to pay bondholders and return to global markets.
Image: Citigroup Center building at 500 W. Madison St Chicago, IL, US. Photo: courtesy of Jarred Trost
