UPDATE 3-Argentina sues Citibank over deal with holdout creditors
(Adds Citigroup comment, details from economy minister)
By Richard Lough
BUENOS AIRES, April 8 (Reuters) - Argentina is suing Citibank Argentina in local courts for striking an illegal deal with a group of U.S. creditors fighting the government over unpaid debt, its economy minister said on Wednesday.
The South American country's legal action marks a fresh low in its deteriorating relations with the local subsidiary of Citigroup Inc, which has portrayed itself as an innocent party in Argentina's bitter debt battle with the funds.
Citigroup denied violating Argentine laws and said it was disappointed by Argentina's judicial steps. It did not detail what action it would take in response.
Economy Minister Axel Kicillof said last month's agreement involved Citibank, which had acted as custodian of some Argentine-law sovereign bonds, agreeing to handover the details of client accounts and fund movements to the hedge funds.
Kicillof said the deal "violated and interfered with regulations governing our public debt."
Citibank Argentina found itself caught in the eye of Argentina's debt storm after the government demanded it process coupon payments on exchanged debt, in defiance of U.S. court orders.
The case stems from a lengthy legal feud between President Cristina Fernandez's government and the funds led by billionaire Paul Singer's NML Capital over the payment terms offered in bond swaps that followed Argentina's record 2002 default. Continuación...