Last updated: June 19, 2014 12:46 am
Argentina changes tack by agreeing to meet ‘vulture’ funds
Argentina has made a key concession in its long-running dispute with a group of so-called holdout creditors after agreeing to a meeting in New York next week to discuss debt repayments that could help the nation avert a looming default.
The holdouts, consistently described as “vultures” by government officials, are made up largely of a group of hedge funds that did not participate in the country’s two previous debt restructurings.
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The holdouts have battled with the government to obtain better repayment terms at the same time as Argentina faces obligations to creditors that took part in the restructurings.
“The plan is to be here next week to negotiate with the holdouts,” said Carmine Boccuzzi, of Cleary Gottlieb Steen & Hamilton, the lawyer representing Argentina, at a hearing before Thomas Griesa, a New York district judge.
The negotiations with the holdouts are also central to the South American nation’s latest attempts to keep making payments on its restructured bonds.
A payment on the restructured debt of nearly $1bn falls due by June 30. If the government fails to pay interest on the notes by the end of the month, the bonds will be in default after a 30-day grace period.
On Tuesday, Argentina announced a last-minute plan to switch the legal jurisdiction of its restructured bonds from US law into Argentine law. But Judge Griesa said on Wednesday that such a plan would be in “violation” of his rulings that the country must repay $1.5bn to holdout investors before servicing its restructured debt.
“An exchange [switching jurisdiction] offer is not happening,” Mr Boccuzzi said at the hearing.
Judge Griesa ruled in 2012 that if Argentina continued payments to creditors who participated in two debt restructurings in 2005 and 2010, it must also pay the full value of the bonds owned by holdouts.
That group is led by NML Capital, a subsidiary of Elliott Capital Management, a hedge fund controlled by the US billionaire investor Paul Singer.
Argentina’s decision to negotiate with the holdouts comes less than two days after President Cristina Fernández raised the prospect of another sovereign default, saying that her government would not succumb to “extortion”. Her comments followed the US Supreme Court’s decision on Monday to reject an Argentine petition to reverse a legal ruling by Judge Griesa.
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Axel Kicillof, Argentina’s economy minister, had said: “If Griesa’s sentence is implemented . . . and Argentina has to pay the vulture funds, this would push Argentina into a default.”
But the country’s fresh willingness to negotiate with the holdouts may help resolve the decade-long conflict, which has prevented Argentina from raising funds in international capital markets, analysts said.
“If we can get a positive spin in all of this, maybe this is a sign that we are finally close to seeing some sort of resolution in this dispute between Argentina and the holdouts,” said Win Thin, an emerging markets currency strategist at Brown Brothers Harriman.
Argentine bonds rallied on news of next week’s talks with the holdouts. The bonds tumbled earlier this week after the US Supreme Court’s decision.
Additional reporting by Ed Stocker in Buenos Aires
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