Wednesday, July 23, 2014

US/Argentina: District Court Judge Insists That Hedge Funds, Argentina Meet Until Settlement Found

According to The Latin American Tribune, US District Judge Thomas Griesa in Manhattan said that Argentina and creditors who boycotted Buenos Aires’ debt restructurings must negotiate “continuously until a settlement is reached” to avoid another default.

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.
 
Yet, a group of hedge funds that refused to accept the debt swaps sued Argentina in the US courts for full payment on their bonds.

In November 2012, Judge Griesa ordered Buenos Aires to repay more than $1.3 billion in defaulted debt to the litigating hedge funds, led by Elliott Management Corp.’s NML Capital Ltd. and Aurelius Capital Management.


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.

COMMENT: Griesa has blocked Argentina’s attempt to make scheduled payments to creditors who accepted the reschedulings and Buenos Aires faces the prospect of yet another default on July 30 if it cannot resolve the dispute with the hedge funds before then.
 
Representatives of the Argentine government and the hedge funds have met with Daniel Pollack, the attorney Griesa appointed last month to mediate between the parties, but the sides remain far apart.

Griesa on Tuesday (July 22) rejected an Argentine motion to stay his earlier rulings, insisting that Buenos Aires has other options to avoid a second default.


Pollack announced plans to meet with Argentina and the creditors at 1000 hours on Wednesday (July 23).

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 populist government.

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