A U.S. appeals court Friday dismissed an appeal by Citigroup Inc. and Argentina of a judge’s order blocking the bank from processing payments on US$8.4 billion in bonds issued under the country’s local laws following its 2002 default.

    The Second U.S. Circuit Court of Appeals in New York, in a brief order, declined to find it had jurisdiction because the order Citigroup and Argentina appealed was a “clarification, not a modification” of a prior decision by U.S. District Judge Thomas Griesa.

    But the appellate court, ruling a day after hearing the appeal, said nothing in its decision was intended to prevent Citigroup from seeking further relief from Griesa.

    Karen Wagner, Citigroup’s lawyer, told the appeals court Thursday that the bank faces regulatory and criminal sanctions by Argentina, which defaulted again in July, if it cannot process the US$5 million payment by Sept. 30.

    A Citigroup spokeswoman had no immediate comment. A U.S. lawyer for Argentina did not respond to a request for comment, while a spokesman for a lead bondholder plaintiff, Elliott Management’s NML Capital Ltd., declined to comment.

    Argentina defaulted in July after refusing to honor court orders to pay US$1.33 billion plus interest to bondholders suing for full payment on defaulted bonds.

    The hedge funds, led by NML and Aurelius Capital Management, had spurned the country’s 2005 and 2010 debt restructurings, which resulted in exchanges for about 92 percent of the country’s defaulted debt. Investors who exchanged bonds were paid less than 30 cents on the dollar.(SD-Agencies)