“Argentina committed to issuing a proposal by January 25 in order to resolve the judicial dispute, hoping the holdouts will put forward their own proposal,” the Finance Ministry said in a brief press release after the meeing.

Thursday, January 14, 2016

Gov’t to make offer to ‘vultures’ on Jan. 25

Finance Secretary Luis Caputo resumes talks with holdout funds in New York

The government yesterday resumed negotiations with the “vulture” funds in a meeting that lasted more than five hours yesterday, when it announced that it would make a formal offer to the holdout creditors on January 25 to try to reach a deal over the US$9.8 billion debt the country has with the creditors.

Finance Secretary Luis Caputo met in New York with court-appointed mediator Daniel Pollack and representatives from the “vulture” funds, alongside Lee Buchehit, a lawyer at Cleary, Gottlieb, Steen & Hamilton, the firm that will represent Argentina at the talks until the country hires new representation.

“Argentina committed to issuing a proposal by January 25 in order to resolve the judicial dispute, hoping the holdouts will put forward their own proposal,” the Finance Ministry said in a brief press release after the meeing.

Speaking outside Pollack’s office, Caputo said the leading holdouts, including NML and Elliott, were part of one meeting and he held a separate sit-down with the so-called “me-too” bondholders. The offer to be issued on January 25 will include all the creditors to try to put a final end to the issue, he said, without going into details.

“If we add up the original ruling plus the me-too bondholders, that leads to a debt of US$2.9 billion. Nevertheless, the figure rose to US$9.8 billion after the last ruling. That’s the cost of failing to do anything about the issue over the last 10 years,” Finance Minister Alfonso Prat-Gay said during a press conference earlier in the day. “We want to solve the issue. It has been extremely expensive for the country.”

In October, United States District Judge Thomas Griesa extended his ruling that Argentina must repay Elliott and other hedge funds US$1.88 billion to holders of an additional US$6.1 billion in defaulted debt.

Prat-Gay said the government will focus efforts on getting holdouts to agree to a cut in the face value of the bonds in order to lower the bill. A large part of the interest accumulated over the years are unfair and should be reviewed, he said, claming Macri’s administration won’t accept a large interest payment as the Cristina Fernández de Kirchner administration did with the Paris Club.

While he blamed CFK for not solving the issue, he also questioned the government’s lawyers in New York and said they were responsible for the current situation. They will continue to work for the government because of their accumulated experience on the case but the leading role will be taken by the new firm that will be hired over the next few weeks.

“They have been ineffective in achieving the result we needed. But they have an accumulated experience that we don’t want to lose. We’ll leave them on the defence but we’ll hire another firm for the attack,” Prat-Gay said. “We’ll choose a new firm through a public tender and they will have to work with Cleary.”

Long-term case

Caputo has already travelled twice to New York since Macri’s presidential victory on November 22 to meet with Pollack and discuss the upcoming negotiations.

The talks mark a major breakthrough in the dispute, which has kept Argentina largely shut out of international capital markets.

Argentina refused in 2014 to heed Griesa’s orders to pay the holdout hedge funds, led by NML and Aurelius, at the same time as it pays bondholders who participated in the debt swaps following the country’s 2001 default. That order came after the US Supreme Court declined to hear Argentina’s appeal of Griesa’s ruling and settlement talks went nowhere..

Even if Macri is able to reach a settlement with the “vulture” funds in the upcoming January 25 meeting, his job won’t be finished. He still needs to convince Congress, which is controlled by the opposition, to repeal or change a law that bars Argentina from reopening the 2005 and 2010 restructurings.

Herald with Bloomberg