UPDATE 2-U.S. urges Argentina to find solution with holdout investors

Thu Jul 3, 2014 8:36pm EDT

(Adds statement from U.S. court mediator)

By Krista Hughes

WASHINGTON, July 3 (Reuters) - The United States on Thursday urged Argentina to negotiate a solution with holdout investors after a string of U.S. court decisions that have pushed the country to the brink of default.

Argentina has until the end of July to settle with creditors who refused to accept the terms of past bond restructurings.

If it fails, the country risks tumbling into its second sovereign debt default in 12 years as it grapples with recession, one of the world's highest inflation rates and dwindling foreign reserves.

Roberta Jacobson, U.S. assistant secretary of state for western hemisphere affairs, said it was in Argentina's interest to normalize relations with all creditors and in the interests of the country and the international community that Argentina fully participate in the international financial system.

"Both sides of this dispute have said at different times they would be willing to negotiate, which we believe offers the parties the best path to a resolution," she said at a meeting of the Organization of American States (OAS).

"We are hopeful that Argentina will find a solution to this matter that resolves its issues with the bondholders and allows it to return to inclusive growth."

Argentina's failure to pay about $100 billion of debt in 2001-2002 devastated the economy, crashed the currency, thrust millions of middle-class Argentines into poverty and has shut Latin America's No. 3 economy out of global markets.

Argentine Foreign Minister Hector Timerman said the country was ready to negotiate with the holdouts, led by hedge funds that specialize in buying deeply discounted or distressed debt and negotiating profitable settlements, but on fair terms.

"We are not going to accept extortion and we are not going to accept measures that go against the Argentine people," he said.

OAS member states passed a declaration backing Argentina, but Jacobson said the United States could not support it as the matter was before the courts.

Holdouts led by Elliott Management's NML Capital and Aurelius Capital Management rejected terms offered in restructurings in 2005 and 2010. These were accepted by more than 90 percent of investors who received less than one-third the original value of their bonds.

The holdouts want the full value, or $1.33 billion plus interest, although they say they are willing to negotiate.

Argentina is sending a team to New York on July 7 to meet with court-appointed mediator Daniel Pollack.

Economy Minister Axel Kicillof told a news conference the composition of the team had not been decided and there was no date set for meeting the holdouts.

Pollack had issued a statement earlier on Thursday saying Argentina's lawyers had confirmed the delegation would include government officials such as the secretary of finances. It is not clear how much authority such officials, ranked below Kicillof, will have to negotiate.

Jay Newman, senior portfolio manager at Elliott Management, said in a statement it was time Argentina sat down with creditors and negotiated the resolution of its debt. (Reporting by Krista Hughes; Additional reporting by Sarah Marsh and Nicolas Misculin in Buenos Aires; Editing by Leslie Adler and Lisa Shumaker)

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Comments (3)
GermanHoldout wrote:
An agreement with the Holdouts would be a win-win situation for everybody!

For Argentina, for the Holdouts and also for the exchange bondholders, whose bonds rates would also be considerably increased.

Already now, with the expectations for an agreement, as we see, borrowing costs are lowering considerable.

An completed final agreement with the Holdouts would improve Argentina’s ratings, initiate a firework of investments and enable also cheaper credits for argentine companies.

Also 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.

Jul 03, 2014 10:15pm EDT  --  Report as abuse
emassot wrote:
“Jay Newman…said…it was time Argentina sat down with creditors and negotiated the resolution of its debt.”
Mr. Newman’s statement is highly hypocritical and is done for public relation purposes.
Argentina has been negotiating from day 1. How else it would have reached agreements with 92 of its creditors? It was the vulture funds who never came to the table because their strategy was to get 100 per cent of the value of bonds they had purchased for pennies on the dollar. Using that strategy, they successfully sued countries such as Peru and Congo-Brazzaville, sucking millions from those impoverished countries. If the courts stopped working as collection agencies for these predatory financiers, then they would have no other option and negotiate as the 92 per cent did.

Jul 04, 2014 3:35am EDT  --  Report as abuse
GermanHoldout wrote:
@emassot

You believe yourself not what you write there ….

Jul 04, 2014 12:05pm EDT  --  Report as abuse
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