July 28, 2014 5:22 pm
Argentine debt ‘holdout’ deal back on table
A group of Argentina’s creditors that accepted restructured debt after a 2001 default have offered to waive a clause in their bond contracts that could help the government to reach a deal with “holdout” creditors and avoid a fresh default on Wednesday.
Holders of more than $4bn of Argentina’s $11bn of Discount and Par eurobonds have sent a letter to Daniel Pollack, the “special master” mediating the talks, offering to waive the RUFO (rights upon future offers) clause in order to contribute to a settlement, a source familiar with the negotiations told the Financial Times.
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The RUFO clause is widely believed to be the main obstacle preventing the government from reaching a settlement with the holdouts, since it prevents Argentina from paying them more than the exchange bondholders, who own debt under foreign law worth about $30bn.
Although in June the US Supreme Court upheld a ruling that the government must pay the holdouts $1.5bn, the government says that if it does so before the RUFO clause expires at the end of this year, it could trigger litigation for amounts between $120bn and $500bn.
“At this point we just want these negotiations to move forward and we are doing our part,” said the source.
Other exchange bondholders contacted by the Financial Times had no comment on whether they were also willing to waive the RUFO clause.
Argentina’s cabinet chief, Jorge Capitanich, said on Monday that a delegation led by finance secretary Pablo Lopez will not meet Mr Pollack until Tuesday, triggering a fall in bond prices to their lowest levels in more than a month, as the chances of a settlement appeared increasingly slim.
“Argentina will look to reinstate a stay,” Mr Capitanich told reporters, referring to a measure that had suspended the US court ruling to pay the holdouts until the Supreme Court rejected Argentina’s appeal, and which would stave off default on Wednesday and allow more time for negotiations.
Argentine officials have refused to hold face-to-face meetings with the group of US hedge funds led by Paul Singer’s Elliott Management since a $539m interest payment on its debt was blocked on June 30 by a US court for not complying with the ruling to pay the holdouts.
Mr Pollack said in a statement on Monday that he is “available to the [officials of the Argentine] Republic at any and all times, either in person or by telephone, in view both of the gravity of this situation and the shortness of time to resolve it without default”.
“I again urged direct, face-to-face conversations with the bondholders, but that will not happen tomorrow,” Mr Pollack added.
“The tight deadline and polarised sides suggest no resolution. The inflexibility of Argentina on the RUFO liability is the main stumbling block,” said Siobhan Morden, an analyst at Jefferies, in a note to clients on Monday. “The only chance of averting default is if the holdouts support an unconditional stay of execution, which they have publicly refused. We assign a high probability to default,” she added.
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