Citigroup said Tuesday that it plans to exit its Argentine custody business "soon" following a US ruling last week barring it from handling payments on Argentine bonds.
The big US bank wants to "exit the custody business in Argentina as soon as possible," it said in a letter to US Judge Thomas Griesa, who last week prohibited the payments in a long-running legal battle between Argentina and a pair of US hedge funds.
Next steps could include the sale of the custody business, or just terminating it, Citi attorneys at Davis Polk & Wardwell said in the letter.
The letter marks the latest wrinkle in the battle between Argentina and a pair of holdout hedge funds it calls "vulture." The funds, NML Capital and Aurelius Capital Management, rejected terms of a 2010 Argentina debt restructuring of some $100 billion in debt following a 2001 default by Argentina.
Griesa has ruled that Argentina must first pay off the hedge funds before it can pay other creditors.
Citi last week argued that the exchange bonds issued under Argentine law were beyond Griesa's jurisdiction, and so its Argentine branch could process payments for the government.
But Griesa rejected Citi's stance, saying that the hedge fund case applied to any payments made on any external debt, and the Argentine-law bonds, denominated in US dollars and sold to foreign creditors, amount to external debt even if issued inside the country.
On Tuesday, Citi requested Griesa schedule a conference in the case "at the earliest possible time" to discuss issues following last week's ruling, including a threat by Argentina to bar Citi from operating in the country if does not issue the payments.