No Progress In Argentine Talks As Default Looms

Jul 25 2014 | 3:38pm ET

Talks to avoid Argentina’s impending default are apparently going nowhere just five days before the event, according to one of the hedge-fund holdouts from the country’s last default.

Representatives of the country were set to meet for the second-straight day with a court-appointed mediator. But they are still refusing to meet with the hedge funds, Elliott Management and Aurelius Capital Management, and no progress was reported yesterday after three hours of meetings.

“The representatives of the bondholders were agreeable to direct talks; the representatives of the Republic declined to engage in direct talks,” the special master, Daniel Pollack, said. “The issues separating the parties remain unresolved at this time.”

Elliott’s NML Capital subsidiary said yesterday that Argentina “will be choosing default” on Wednesday, when its 30-day grace period expires. The country missed a $539 million payment to holders of its restructured debt on June 30.

“We will continue to seek ways to engage Argentina in negotiations, but there is currently a total lack of willingness on Argentina’s part to solve this problem,” the hedge fund said.

U.S. District Judge Thomas Griesa—backed by the U.S. Supreme Court—has barred Argentina from paying its restructured debt without also paying the holdouts about $1.5 billion. Argentina has insisted that following Griesa’s order would be “impossible” and would open the country to hundreds of billions of dollars in claims from bondholders who accepted 30 cents on the dollar during its debt exchanges in 2005 and 2010.

Argentina has twice asked Griesa to reinstate a stay that will allow it to make the $539 million payment, a request that the judge has twice refused. But the country insists that negotiation is not possible without such an order.

Argentine Economy Minister Axel Kiciloff said that Griesa’s rulings were “unprecedented and impossible to fulfill.” Cabinet Chief Jorge Capitanich insisted that his country’s refusal to negotiate was not the problem.

“With the good faith of the vulture funds and a rational attitude from Griesa, this litigation can be resolved,” he said.

Argentina hopes to wait out a rights against future offers clause in its restructured debt, which bars it from voluntarily making a better deal with the holdouts. That provision expires at the end of the year.

“Either there are hidden agendas or there is a deliberate attempt to strike down the restructuring of debt that was voluntarily accepted by 92.4% of creditors,” Capitanich said.

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