Argentina Misses Payment, Not Talking With Hedge Funds

Jul 1 2014 | 8:29am ET

Argentina is now technically in default on nearly $30 billion in debt, but the country appears to be in no hurry to resolve its dispute with hedge-fund holdouts from its last default 13 years ago.

The South American country yesterday failed to make more than $500 million in payments on debt restructured after its 2001 default. Argentina transferred the money to its U.S. bank, the Bank of New York Mellon, but that firm bowed to the threats of a federal judge and refused to send it along to bondholders. The same judge, U.S. District Judge Thomas Griesa, has ruled that Argentina can only pay the exchange bondholders if it pays the holdouts, led by Elliott Management, $1.5 billion.

Still, Argentina is only in technical default: Its bonds give it a 30-day grace period to pay creditors—30 more days to strike a deal with Elliott, Aurelius Capital Management and the other holdouts, who refused to take a huge haircut to exchange their defaulted debt for performing notes.

That firm deadline does not have Argentina racing to the negotiating table: Elliott and Aurelius said yesterday that Argentina has so far refused to talk with it in the two weeks since the U.S. Supreme Court allowed Griesa’s ruling to stand. Argentina said it had selected a delegation to meet with court-appointed mediator Daniel Pollack, but not until July 7, and with no assurances that the group would actually sit down with the holdouts.

Griesa appointed Pollack more than a week ago. But during two conference calls last week, Argentina’s lawyers insisted that the reinstatement of a stay allowing it to pay exchange bondholders without paying the holdouts was necessary to begin negotiations, The Wall Street Journal reports. Those demands came after Griesa had already rejected Argentina’s request to put the stay back in place.

In a statement, Argentina’s Economy Ministry implied that a stay was necessary. “Argentina reiterates its intention to negotiate in fair, equitable and legal conditions that take into account the interests of 100% of creditors, which clearly implies that restructured bondholders be permitted to receive payment for current maturities,” it said.

Economy Minister Axel Kicillof, who was in New York last week to speak to the United Nations, will return on Thursday for an Organization of American States meeting in Washington, D.C.

 “Argentina’s professed willingness to negotiate with its creditors has proven to be just another broken promise,” Elliott Management’s Jay Newman said. “NML,” the Elliott division that owns the Argentine bonds, “is at the table, ready to talk, but Argentina has refused to negotiate any aspect of this dispute.”

“Argentina’s government has chosen to put the country on the brink of default,” he continued. “We sincerely hope it reconsiders this dead-end path.”

“The Argentina government seems determined to cause many billions of its debt to accelerate on July 30 and start yet another Argentine debt crisis,” Aurelius chief Mark Brodsky added. “This is completely avoidable. An eminently affordable settlement can be reached with the holdouts, yet Argentina’s administration refuses to even meet.”

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