(Adds details from ruling, no immediate comment from parties, byline)
By Joseph Ax
NEW YORK, Oct 5 (Reuters) - A U.S. appeals court on Monday refused to force Bank of New York Mellon Corp to turn over to holders of defaulted Argentine bonds any of the $539 million the country deposited in 2014 to pay creditors who participated in its past restructurings.
The 2nd U.S. Circuit Court of Appeals in New York upheld an October 2014 ruling from U.S. District Judge Thomas Griesa, agreeing that the plaintiffs were not entitled to possess the funds and did not have rights to the money superior to that of BNY Mellon.
“At most, then, the (Argentine) Republic’s transfer was a preference among creditors,” a three-judge panel wrote. “But under New York law, preferring one creditor over another is neither actually nor constructively fraudulent.”
Anthony Costantini, a lawyer for the majority of the bondholders seeking payment, said the court failed to take into account additional legal arguments he made in a letter filed last week.
“We will make a motion for rehearing,” he said.
A lawyer for Argentina, Carmine Boccuzzi, said in an email, “The Court of Appeals correctly recognized that these are exchange bondholder funds to which holdouts have no claim.”
A lawyer and a spokesman for BNY Mellon did not immediately respond to requests for comment.
Griesa has previously blocked Argentina from making payments to bondholders who participated in sovereign debt exchanges in 2005 and 2010 following the country’s $100 billion default in 2002, unless it also pays holdout creditors who refused to do so.
The plaintiffs in the two cases decided Monday did not include Elliott Management’s NML Capital Ltd and Aurelius Capital Management, who lead the holdout group that Griesa has ruled is entitled to $1.33 billion plus interest from Argentina.
In June 2014, the republic deposited $539 million in BNY Mellon’s account at the Central Bank of Argentina, earmarked for exchange bondholders. But Griesa ordered BNY, the trustee for the funds, to hold the money, saying Argentina’s actions violated his prior orders.
The bondholders affected by Monday’s decisions have approximately $100 million in judgments against Argentina.
The South American country again defaulted in July 2014 after refusing to honor Griesa’s orders.
The cases are Applestein et al v. The Republic of Argentina, No. 14-4221, and Dussault v. Republic of Argentina, No. 14-4235, both in the 2nd U.S. Circuit Court of Appeals. (Reporting by Joseph Ax; Additional reporting by Nate Raymond; Editing by Chizu Nomiyama and Jonathan Oatis)