The nasty battle between Argentina and a group of New York hedge funds has claimed another victim: Citigroup, The New York Times DealBook reported yesterday. The bank said that it would shut its custody business in Argentina after a federal judge in New York last week rejected its request to lift an order that prevented the bank from making interest payments to investors holding $2.3 billion in Argentine notes. Citing an “unprecedented international conflict of laws,” Citigroup said that its Argentine branch was making plans to close the custody business “as soon as possible,” and will continue to pursue “all legal remedies.” The bruising defeat for Citigroup follows a decision from the Federal District Court in Manhattan last summer to block all interest payments on Argentine debt, a ruling that set off Argentina’s default last July 31. Citigroup’s action was the latest flash point for the investors and banks on the sidelines of a multi-year court fight that traces back to 2001, when Argentina defaulted on $100 billion of debt. Most investors have since traded in their bonds for discounted exchange notes, but a small group of hedge fund managers chose not to exchange their bonds and instead took Argentina to court in New York to seek full repayment.
