Argentina just pulled a complete and total "Argentina" and sacked the head of Citibank in the country.

The Argentine government said Citibank Argentina CEO Gabriel Ribisich, who has led the bank since 2013, was fired because he "ignored" local laws.

Citi has also been banned from the Argentine securities market.

Those watching the drama that is the Argentine government versus a group of holdout hedge fund creditors may have seen this twist coming. Last month, Citi got in the middle of this truly epic knockdown, drag-out fight, and that was bound to result in some ugliness.

"Argentina still can’t point to a single law that Citibank Argentina has broken," said a source close to the situation. "This has nothing to do with Argentine law or Citi being caught in a conflict of laws. This is just thuggish retaliation against Citi for dropping its appeal and thus ceasing to provide legal assistance to Argentina in Argentina’s ongoing campaign to poke holes in the pari passu injunction — which only shows how determined Argentina is to avoid negotiations of any kind with any percentage of its creditors."

A group of hedge funds led by Elliott Management's Paul Singer (and known as NML) have been suing Argentina for over $1.3 billion in sovereign debt dating back to 2001 — an amount that is 100 cents on the dollar of their investment. Argentina has refused to pay that amount because more than 90% of investors in the same debt agreed to a haircut on their repayment.

That refusal pushed Argentina into default last summer, but since then the country has been trying every trick in the book to force custody banks to defy a US judge's order and pay all the investors but NML.

One trick was to "change" the legal jurisdiction of the bonds to Buenos Aires so an Argentine judge could deal with the matter. However, custody banks don't want to mess with Judge Thomas Griesa, the US judge, so that has not worked for Argentina.

That's where things got messy for Citi. The bank tried to play nice with Argentina and asked Judge Griesa if it could disperse funds to Argentina's investors. Neither Judge Griesa nor NML would allow that.

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“NML and other creditors reached an agreement with Citibank, according to which Citibank agreed not to appeal the court’s determination that the pari passu injunction covers all of Argentina’s exchange bonds," NML said in a statement. "Judge Griesa approved this agreement, which applies only to Citibank and was specifically tailored to address the unique circumstances facing Citi Argentina after Citibank announced it was exiting the custody business in Argentina.”

Those "unique circumstances" included threats of retaliation from the Argentine government. At the time it was not totally clear what retaliation meant, but the word thrown around by sources close to the situation was "draconian."

So Citi pulls up stakes and takes its custody business out of the country (politicians were talking about revoking the bank's operating license anyway). The bank said that in doing business in Argentina it faced an “unprecedented international conflict of laws.”



Problem is, Argentina wasn't having it. High-level politicians said the Citi would in no way get to leave the country.

The creditors, seeing that these threats were getting serious, allowed Citi to pay investors so that it could begin the process of taking its custody business out of Buenos Aires (other custody banks were not allowed to pay, and the country remains in default).

Argentina can make Citi's exit "a very difficult, long and drawn-out process," David Fernandez, a public finance lawyer at Buchanan, Ingersoll & Rooney told Business Insider. "But if somebody doesn't want to do the business, eventually they're going to find their way out of it."



Sure, but they might get a little bruised in the process.

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