"The government is giving signals for the first time that it is willing to evaluate a solution. Kicillof’s people are talking with banks, seeking to come up with common positions, taking into account that the easiest way for Argentina to avoid any issue of crisis is by settling with the holdouts, and the want to do things well," said another source from Wall Street

La Nacion

David Martínez and Manzano are negotiating an agreement between the vulture funds and the government

They seek to replicate the agreement reached with Gramercy in the ICSID  

 

Monday, March 17, 2014

 

By Florencia Donovan

 

The problem of the bondholders that didn’t enter the debt swaps and that are now suing in American courts threatens, in the short term, the government’s plan to return to the international markets.  

 

In New York, however, days ago two negotiations began to be carried out in parallel, to deal with the problem of the holdouts, which are making noise among various big investment funds.  

 

Perhaps the most resonant is the one that was started three weeks ago by the owner of Fintech, David Martinez of Mexico, who convened a handful of representatives of funds with holdings in Argentine bonds, with the intention of starting to negotiate a way out putting forth a similar scheme to the one that Argentina already used to settle the rulings that it had lost in the ICSID, the arbitral tribunal of the World Bank.   In this case, the Gramercy fund bought the debt from five companies that had obtained definitive rulings against the country and, in turn, then received a long-term bond from the government.

 

But what caught the attention of investors was not so much Martinez’s proposal, but the intervention in the negotiation of former Menem minister and current industry lobbyist and media businessman, José Luis Manzano. Both assured their interlocutors that they have the approval of the government to start a negotiated exit for the debt in default. LA NACION tried to contact spokesmen for Martinez, but received no response; nor in the Economy, where they neither confirmed nor denied the information.

 

"David Martinez is trying to establish contacts with key people from New York," confirmed a source from Wall Street. "Manzano is involved in trying to carry out this deal. They say that they have the ability from the Argentine government to be negotiating," the source said. On Wall Street, it even came out that JP Morgan Investment Bank has been contacted by Martinez for the development of an offer to seduce the holdouts.

 

The idea would be to take up the flag again which, at the beginning of 2013, the Gramercy Fund of the American Robert Koenigsberger had tried to plant when, with the backing of the then-Economy Minister Hernán Lorenzino, and the backing of Deutsche Bank, he sought to entice the holders of Argentine bonds to yield some of the interests of their new bonds and improve the value of the swap that the government would put forth for the vulture funds.

 

But with the change in the economic team and Lorenzino’s designation as Ambassador from Argentina to the European Union, in Brussels, the Gramercy solution was losing strength, and today on Wall Street it is all but forgotten.

 

"Effectively, with Gramercy punctured, Martinez began to sound out some way which would shorten the negotiation with the holdouts,” said another source, who knows the Mexican businessman’s circle, to LA NACION.  The brand new owner of Telecom Argentina has long relationships with the Kirchner administration through Planning Minister Julio De Vido. On Wall Street, however, they also have doubts around his crusade ending up in failure, like Gramercy’s did.  

 

And, moreover, faced with the discomfort among several funds, Economy Minister Axel Kicillof’s team has also been simultaneously contacting several international banks in search of advice for a way out to the problem of the vultures. Even in New York, there is already talk that the Swiss bank, UBS, would be one of the banks to have managed best to capture Kicillof’s attention to make progress in any negotiation.

 

"The government is giving signals for the first time that it is willing to evaluate a solution. Kicillof’s people are talking with banks, seeking to come up with common positions, taking into account that the easiest way for Argentina to avoid any issue of crisis is by settling with the holdouts, and the want to do things well," said another source from Wall Street who is following the Argentine debt issue. "I know that all attempts to build bridges has failed, and there is now more flexibility around seeing if the issue can be resolved. But it has been slow-going, because there are good intentions, but there is not much experience, nor do I think that they have trustworthy people to solve it. It would be a shame if someone else scares them off," the source said.

 

The government is aiming at solving the problem of the vulture funds until the U.S. Supreme Court decides whether to accept Argentina’s case or not, on the discussion of pari passu, which argued that the country could not pay the new bondholders without paying the holdouts at the same time.