UPDATE 3-Paris Club invites Argentina to hold debt negotiation

Fri Mar 14, 2014 5:48pm EDT

Related Topics

* Paris Club set May date for debt negotiations

* Germany, Japan biggest holders of debt

* Argentine needs to regain access to markets

By Leigh Thomas

PARIS, March 14 (Reuters) - The Paris Club invited the Argentine government on Friday to negotiate paying off its overdue debt, with talks starting in the week of May 26 to take an important step towards settling the long-running debt dispute.

Eager to settle disputes with its creditors, Argentina outlined its conditions in January to repay the roughly $9.5 billion it owes Paris Club members.

"They discussed this proposal in January and February, asked for clarification and, based on a revised proposal, have invited the government of Argentina to come negotiate an arrears clearance agreement with the Paris Club creditors in May in Paris," secretary general Clotilde L'Angevin told Reuters.

In Buenos Aires, Argentina's economy ministry issued a statement. "The members of the Paris Club have invited us to start formal negotiations toward the end of May," it said.

"Our proposal seeks to develop investment inflows with the objective of confronting new challenges, after a period of 10 years of high and sustained economic growth," it added.

Argentine over-the-counter bond prices rose as much as 2.7 percent on the news of the invitation.

An arrears clearance agreement is not the usual debt rescheduling based on an IMF programme. It would cover principal, interest and late arrears.

In the absence of an IMF programme, which Argentina has ruled out, Paris Club rules forbid any reduction in the value of the country's debt.

Germany is Argentina's biggest Paris Club creditor with about 30 percent of the debt, followed by Japan with about 25 percent. Smaller holders include the Netherlands, Spain, Italy, the United States and Switzerland.

A deal with its creditors for a settlement would help open up new sources of international funding for Argentina. It has been shut out of capital markets for more than a decade since its default.

Argentina and Paris Club members came close to striking a deal in 2008 but the government pulled out at the last moment, concerned about its falling foreign exchange reserves in the midst of the global financial crisis.

With its dollar reserves dwindling, Buenos Aires has been eager to secure a deal that does not put too much strain on its balance of payments.

Argentina's debt to the Paris Club is a legacy of its 2001-02 economic crisis, which culminated in a roughly $100 billion debt default.

The country's history with the informal group of mostly Western nations goes back to the Paris Club's origins in 1956, when Argentina agreed to meet its public creditors in Paris.

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
GermanHoldout wrote:
Also the Holdouts invite Argentina to negotiations to settle its outstanding debt!

Argentina should solve not only the Repsol and Paris Club but also the Holdout Problem!

We are in contrast to Repsol and Paris Club human beings!

To reach an agreement with the holdouts would probably take only few hours…

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

President Obama should help and talk to President Kirchner to end Argentina’s Horror-Default.

President Kirchner (by the way a beautiful women) should end this since 2002 ongoing HORROR-Default and solve the holdout Problem NOW!

In the “Pari Passu” issue the Holdouts are 100% right! There is nothing to discuss. In the bond contracts “Pari Passu” is clear defined. Also, in the bond contracts Argentina has explicitly waived its sovereign immunity.

It would be helpful, if the US Supreme Court promptly rejected Argentina’s unjustified appeal.

The argument:->
“If the U.S. courts uphold the Holdout’s position, as negative consequences , Sovereign debt restructurings will be virtually impossible in the future.”
is NOT TRUE because, after Argentina’s 2001 Default all bonds imply the Collective Action Clause (CAC) A collective Action clause (CAC) allows a supermajority of bondholders (75%) to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring.
BUT, This CAC is NOT implied in Argentina’s repudiated old bonds!
Accordingly, Argentina MUST fulfill the bond contracts and repay the debt to the holdouts!

Also the Argument-> “The country has said that forcing it to pay the defaulted bondholders immediately would expose it to $43 billion in additional claims it can’t pay and trigger a new default. ”
is NOT TRUE, because the clause “Rights Upon Future Offers (RUFO)” ends in December 2014. That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010. Hence, additional claims from Exchange bondholders is completely ruled out.

Argentina should rather sit down and negotiate an acceptable solution with the Holdouts!

The cause of Argentina’s decline is the largest financial crime in world history, this since 2002 ongoing HORROR-Default.

U.S. Senators Rubio and Menendez meant under undemocratic Argentina, that Argentina does not pay its debt.

Non-payment of debt since 2002 to the Holdouts, breaching of bond-contracts are criminal and are highly undemocratic!

Argentina as a great country must reenter the world!

For reentering the world, Argentina must end this HORROR-Default!
Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!!

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

Beyond the U.S. Hedge Funds there are still tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even higher.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

The “Lock Law” ends as of 12/31/2014. (End of the “Rights Upon Future Offers (RUFO) clause in December 2014.) That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010.

If Argentina and the holdouts made NOW A BINDING AGREEMENT with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO) clause in December 2014), seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.
Holdouts want a simple, clear, secure and an ACCEPTABLE solution.
Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc., and with maturities in the eternity. Such “shares like” financial constructs are inacceptable.

A swap from the defaulted old bonds to new bonds is unacceptable also for tax reasons. In Germany, for example, if you accepted a swap, then you would have to pay for the new bonds 30% extra tax…

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds.(Without swapping from old to new bonds, also because of tax reason)

- at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

- For the accrued interest between 2002-2015 Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Mar 14, 2014 2:02pm EDT  --  Report as abuse
GermanHoldout wrote:
Letter of Italian Holdouts to Pope Francis—-
Holy Father Francis Rome, March 14, 2014

we want to turn to her a second time to submit to you the situation of 450,000 Italian investors with their families, who have lent life savings to the Republic of Argentina and, with the default unjustified of 2001, they are seen robbing their great sacrifices.

We have news that you will receive next Monday, March 17th on a private visit, for the second time in his pontificate, the President of Argentina Cristina Fernandez de Kirchner Lady. The visit, suppose searched the Lady, has the sole purpose of having a media image at the forum of the Paris Club, which the Lady herself will attend two days later as a debtor. We pray you, Holy Father, to tell the lady that you should honor your debts and do not come to The tell lies. The Republic of Argentina never fails to comply with the final rulings of various courts chosen by herself in the contracts of the bonds. By all means hiding all the right properties to prevent seizures. A few days ahead of the default has transferred its reserves by the United States to the BIS in Basel, knowing the impossibility of seizure in that bank.

The two exchange offers, much to their heralded, were really shameful for both maturing in 2038 (I would have 100 years) than for the poor and terrorizing interests with statements that have led many to accept despair.

The rulers in Argentina, while trying to justify the theft, did not hesitate to humble himself, in spite of themselves, and they speak, when they think it suits them, of “pocos indices de Desarrollo humano como en Congo, Cote de Ivoire, Ecuador, Parana, Peru y ahora Argentina. ” As you know very well the famous Argentina over the resources of livestock and agriculture, has immense mineral reserves of all kinds of oil and gas in an area as vast as Europe and with only 41 million people, which is why where also many Italian families have decided in the past to move to that country, including his Holy Father.

Each of us has a story: me, and I represent that I am writing a committee of bondholders in the internet, I had to work in Kuwait for 10 years with the hardship of separation from family, the hot climate and in general a very different way of living . Following the conditions of jurisdiction laid down in Argentina, I turned to the Court of Frankfurt am getting full and final condemnation of Argentina, but the nation’s stubbornly refuses to respect my judgment as well as all the others. Also had convictions in the courts of the United States are disregarded Argentina. Instrumentally gives the “vulture” for investment funds. It is maximally vulture who borrows money and then not return it?

For your convenience, when he wanted, the money we were to return to the IMF in advance and at rates considerably cheaper about $ 6.5 billion.

We know of many situations of extreme gravity, even suicide, but also to lack of money to give the necessary care for themselves and their families.

The rulers and unfortunately many Argentine citizens offend us with unjust and ugly epithets as “usureros”, “chupa sangre”, “buitres” etc., when in fact we all have given confidence to Argentina, in preference to other nations that offered better conditions and that, after the Argentine default, for 12 years, regularly return the loan.

Many creditors have died and will die, and this has greatly Argentina, trying to prolong the most of this painful, shameful situation. The time is in his favor: men die nations are eternal.

An Italian association, which includes about 60,000 members, has for many years a dispute in the court of the World Bank called ICSID, but Argentina put in place any more improper action to make specious arguments that may delay the proceedings or even cancel it.

Holiness, although feelings of Catholics, we can not forget the offense received and avoid the strong resentment that we have. We met in person a few characters Argentines, like Hernan Lorenzino, the Ambassadors Taccetti and Di Tella, Hugo Moyano that our demands have not been able to answer us with nothing more than “El mundo nos saqueo todo”, when we know that Argentina has never been looted, certainly not by us, can defend very well and if anything, it is you who plunders herself to a life acceptable and worthy.

How We’ve already told you, Holy Father, in the previous letter we would like to meet you to have a strong resentment to our relief, we hope so, also to tell you to voice our reasons against the other that certainly will be expressed on Monday by Mrs. Fernandez.

We are happy for your first year of his pontificate and wish you many more years for the good of the Catholic Church.

We ask your blessing with great affection and filial devotion salute you

Mar 16, 2014 7:03am EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.