The first direct talks between Argentina and hedge-fund holdouts from its 2001 default, held just days before its latest default last month, appear also to be the last.
The country, which was barred by a U.S. judge from making a US$539 million bond payment on July 30, said it will hold no further talks with the hedge funds, led by Elliott Management and Aurelius Capital Management, alone. Instead, Economy Minister Axel Kicillof told an Argentina congressional committee, the country will focus on reaching a universal deal with all holdout creditors.
Kicillof’s comments all but end hopes of an early resolution to Argentina’s latest default and make a deal prior to next October’s presidential election unlikely. Some analysts and observers had predicted that Argentina would settle early next year, after the expiration of a clause in its restructured debt guaranteeing those creditors the same terms granted under future offers.
More than 92.4% of Argentine bondholders accepted a restructuring that gave them about 30 cents on the dollar in 2005 and 2010.
Kicillof’s comments came as the Argentine Congress began debating a bill that would offer holders of the country’s restructured debt the opportunity to exchange their New York-law bonds for Argentine-law bonds. Such an exchange would enable Argentina to make its coupon payments outside of the authority of U.S. courts.
U.S. District Judge Thomas Griesa, who has barred Argentina from servicing its restructured debt without also paying the holdouts, has said such an exchange would be illegal. But Argentina is moving forward with it, anyway.
“If Congress does not do anything, what it is actually doing is ratifying Judge Griesa’s ruling,” Kicillof said. “This is a story of loan sharks against sovereign countries. Are we going to ratify what Griesa ruled? Is the Argentine Congress going to be Griesa’s clerk office?”
“It is a scandal if Argentina pays,” he added.