Deutsche Bank AG DB is yet to respond to a subpoena filed in April by a group of funds including NML Capital, after Argentina sold about $1.4 billion of Bonar 2024 bonds in the month, per a release by The Financial Times. The German banking giant was among the banks involved in the April offering.
In 2001 Argentina defaulted on almost $100 billion sovereign obligation amid the economic crisis in the nation. This led to restructuring of the defaulted bonds in 2005 and 2010. However, certain ‘holdout’ bond investors including US hedge fund NML Capital – a division of billionaire hedge fund investor Paul Singer’s Elliott Management Corp. and Aurelius Capital Management, refused to accept the discounted restructured bonds. They sued Argentina and demanded full payment.
The US Supreme Court affirmed a ruling last year that until Argentina settles its dispute with holdouts, it cannot service its restructured debt. This ultimately led the South American nation to default in Jul 2014.
Despite the legal dispute, Argentina issued $1.4 billion in U.S. dollar-denominated bonds to local banks and institutional investors in April. Notably, following the offering, U.S. District Judge Thomas Griesa has said that the funds could seek documents related to the offering from Argentina and banks including Deutsche Bank, which would help assess whether there is existence of assets in the United States that could satisfy unpaid judgments of around $1.5 billion.
Citing people familiar with the matter, The Financial Times stated that Deutsche Bank Argentina was one of the institutions that placed orders for the bonds on behalf of third party investors. The holdout investors have sought for documents from Deutsche Bank explaining its role in the auction and previous offerings of Bonar 2024s as well.
The subpoena is seeking documents that would clarify whether there had been any attempt of arranging the offerings of Bonar 2024 bonds in such a way that would “avoid attachment, execution, or other legal process in aid of judgment or pre-judgment enforcement initiated by creditors of Argentina, or any remedy or relief that creditors of Argentina may seek.”
Notably, in February, Argentina looked to sell $2 billion of dollar-denominated bonds through Deutsche Bank and JPMorgan Chase & Co. JPM. However, the issuance did not materialize as court ordered the banks to provide the necessary related documents.
Deutsche Bank currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the foreign banks space include Sumitomo Mitsui Financial Group, Inc. SMFG and BBVA Banco Frances S.A. BFR. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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