Saturday, July 26, 2014

US/Argentina: Update--Mediator in Talks Between Creditors, Argentina Says Status Unresolved

According to The Latin American Tribune, the mediator in settlement talks between the Argentine government and holdout creditors who won a US court judgment ordering the country to make full payment on its defaulted bonds said after meeting separately with both sides that the issues “remain unresolved.”

“After speaking with both sides, separately, I proposed and urged direct, face-to-face talks between the parties. The representatives of the bondholders were agreeable to direct talks; the representatives of (Argentina) declined to engage in direct talks,” Daniel Pollack said in a statement.

An attorney who was appointed by US District Court Judge Thomas Griesa to preside over the settlement negotiations, Pollack said he expected “there will be further meetings with the parties over the next several days” but did not provide exact dates.

In a hearing Tuesday, the Manhattan federal judge urged the two sides to work out a settlement before July 30.

COMMENT: Griesa, who in 2012 ordered Buenos Aires to repay more than $1.3 billion in defaulted debt to the litigating hedge funds, blocked Argentina’s attempt to make a June 30 scheduled interest payment to creditors who accepted debt restructurings unless it simultaneously paid the holdouts.

Buenos Aires faces the prospect of default on July 30, when the 30-day grace period for making that payment expires, if it cannot resolve the dispute with the litigating hedge funds – led by Elliott Management Corp.’s NML Capital Ltd unit and Aurelius Capital Management – before then.

“The time for (Argentina) to avoid default is short,” Pollack said in his statement on Thursday (July 24).

Argentina defaulted on roughly $100 billion in debt in December 2001, the largest sovereign default in world history, amid a financial meltdown and economic depression.

The vast majority of Argentina’s creditors accepted steep haircuts in 2005 and 2010 debt restructurings.

Argentina’s appeal of Griesa’s decision reached the Supreme Court last month, but the justices not only declined to hear the challenge, they issued a separate ruling that enables holdout bondholders to ask US courts to compel Argentina to reveal the locations of its assets.

Full payment to the hedge funds would lead other holdout bondholders that were not part of the US litigation to demand full repayment, according to Argentine President Cristina Fernández’s administration.

Buenos Aires says those potential claims represent a liability of some $15 billion, equivalent to half of Argentina’s foreign-exchange reserves.

Dallen: Argentina's First Default