Citibank N.A. is set to tell an appeals court it faces “grave sanctions” from Argentina unless it defies a U.S. judge’s order blocking it from making payments to holders of $8.4 billion of the country’s bonds, Bloomberg News reported today. U.S. District Judge Thomas Griesa in Manhattan barred Citibank’s Argentina branch from forwarding a $5 million interest payment due Sept. 30 to the bondholders if the South American nation continues to refuse to make payments on its defaulted debt. If it doesn’t pay, Citibank claims, the branch and its executives face possible criminal and civil penalties, including the loss of its banking license and takeover by Argentina. “Citibank cannot comply with both of these directives — one from a United States court and one from the sovereign state in which its branch operates,” the bank, a unit of New York-based Citigroup Inc., said in a filing with the U.S. Court of Appeals in Manhattan. Griesa’s July 28 order is one in a series barring Argentina from making payments on its performing debt unless it also pays $1.5 billion to a group led by Paul Singer’s NML Capital that owns its defaulted bonds. Argentina’s refusal to make that payment triggered a July 30 default when it was blocked from making a $539 million interest payment on its restructured debt.
