Bank negotiations with holdouts stagnate

Bank negotiations with holdouts stagnate

Wednesday, August 13, 2014

Offer to take over defaulted debt currently lower than initially reported

International banks and vulture funds are struggling to strike a deal on Argentina’s defaulted sovereign’s debt, sources close to the latter party and the situation said yesterday.

Citi, Deutsche Bank, HSBC and JP Morgan last week offered the holdouts 40 cents on the dollar for their roughly US$1.66 billion in bonds including interest, and raised that offer to 50 cents on Monday, the sources said.

But that is far below the 80 cents that was initially reported to have been on the table last week.

“These are not fully-baked proposals,” said a source from one of the holdout firms — hedge funds led by Aurelius Capital and NML Capital.

“Right now, any and all deal talks are completely dead, because the bitter public rhetoric of the Argentine government has killed any such interest on the part of third parties,” the vulture-fund-connected source added.

OTHER OPTIONS?

Billionaire Eduardo Eurnekian, the owner of Corporación América, may be putting together an industrial group to buy the holdout debt, but Reuters’ source denied Eurnekian had contacted them.

Another source at the holdout creditors said they would be more open to a hybrid of Paris Club and Repsol deals.

In May, Spain’s Repsol received US$6 billion in bonds as compensation for the 2012 expropriation of its 51 percent stake in state oil company YPF. That same month, the government said it would pay US$9.7 billion in arrears to its Paris Club of creditor nations over five years.

“This likely doesn’t have to cost Argentina much, if any, cash,” said the second source. “Bonds can be a major part of the deal.”

The government says it has not been provided any guarantees of the Rights Upon Future Offers (RUFO) clause of its restructured debt, which expires in January, being triggered, saying it is thus impeded from offering better terms to the holdout investors.

This would trigger the clause and expose it to billions of dollars worth of claims, the government says.

Talks between the banks and the holdouts have been going on for the past two weeks.

Analysts say the banks may be nervous about what sort of reassurance they can obtain from Argentina that it will buy the debt back from them, and at what price.

“Our insecurity and the insecurity of the banks has been that the government hasn’t given any indications regarding price points or structure once January hits,” a source close to the talks said.

Daniel Pollack, the court-appointed mediator in the debt dispute between Argentina and holdout creditors, who has come under fire from the government for his handling of the talks, expects to hold more meetings with both sides.

The two sides have not sat face-to-face since the July 30 default.

—Herald with Reuters