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Tags: Argentine | bonds | holdout | default

Argentine Bonds Fall as Government Refusing Talks With Holdouts

Friday, 25 July 2014 10:18 AM EDT

Argentine bonds dropped after the government refused to hold face-to-face talks with holdout creditors yesterday to avert a possible default next week.

Bonds due in 2033 fell 2.8 cents to 85.6 cents on the dollar at 9:26 a.m. in New York, the biggest decline in two weeks. Government officials and representatives of holdout creditors including Elliott Management Corp. were scheduled to return to court-appointed mediator Daniel Pollack’s office at 10 a.m. in New York for another meeting.

While today will mark a fourth set of talks with the mediator this month, the two sides haven’t moved any closer to a settlement that would prevent the country from defaulting on July 30, according to Pollack.

“After speaking with both sides, separately, I proposed and urged direct, face-to-face talks between the parties,” Pollack said in a statement. “The representatives of the bondholders were agreeable to direct talks. The representatives of the republic declined to engage in direct talks.”

U.S. District Court Judge Thomas Griesa, who ruled in favor of defaulted-bond holders, ordered “continuous” talks before next week’s deadline, when a 30-day grace period for an Argentine debt payment expires. Griesa said the country must pay the group of holdouts $1.5 billion if it makes any more payments on restructured debt.

Argentina’s delegation called for the court to create a financial instrument to protect against risks related to a clause that would require the nation to offer any terms reached with holdout creditors to owners of restructured notes. If no such instrument is created, a stay would be the best option, Economy Minister Axel Kicillof said in an e-mailed statement.

Blocked Payment

Argentine Cabinet Chief Jorge Capitanich said today at a press conference that Griesa is showing “bad faith” by not granting a stay, which would help “solve the problem.”

The government deposited $539 million with a trustee bank last month to cover payments to holders of restructured bonds, without also providing money for the holdouts, prompting Griesa to block any disbursements.

Argentine bonds rallied yesterday the most in emerging markets on speculation that the holdouts will ask Griesa for a delay of his ruling until Dec. 31. That’s the expiration date of a bond clause prohibiting Argentina from sweetening terms for the holdouts without giving a similar offer to investors who complied with the country’s earlier efforts to restructure its debt. Argentina defaulted on $95 billion of debt in 2001.

‘Engage Argentina’

Violating the clause could expose the country to claims of as much as $500 billion, according to Argentina. The nation will keep meeting its obligations and won’t fall into default, President Cristina Fernandez de Kirchner said this week.

NML Capital Ltd., the Elliott unit involved in the case, said Argentine officials refused to negotiate on any aspect of the dispute and instead stated that no solution was possible.

“We will continue to seek ways to engage Argentina in negotiations,” NML said in an e-mailed statement. “But there is currently a total lack of willingness on Argentina’s part to solve this problem.”

© Copyright 2023 Bloomberg News. All rights reserved.

Argentine bonds dropped after the government refused to hold face-to-face talks with holdout creditors yesterday to avert a possible default next week.
Argentine, bonds, holdout, default
Friday, 25 July 2014 10:18 AM
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