WRAPUP 1-Argentina to send technical experts, not minister, to mediator talks

Thu Jul 10, 2014 11:48am EDT

(Adds jump in bond prices)

By Walter Bianchi

BUENOS AIRES, July 10 (Reuters) - Argentina said on Thursday it would send a team of technocrats rather than its economy minister to its second meeting on Friday in New York with a court-appointed mediator in its dispute with holdout investors over its sovereign debt.

Argentina needs to seal a deal before a July 30 deadline with investors who rejected its debt restructurings after its catastrophic 2002 default on $100 billion. Growing optimism it will reach one sent its bonds higher on Thursday.

With no deal, Latin America's No. 3 economy risks tumbling into a new default at the same time as it battles a recession, one of the world's highest inflation rates and dwindling foreign reserves.

"The mission that will meet with the special master Daniel Pollack in New York will be carried out by the juridical and financial team of the economy ministry and other areas of the government," Argentine Cabinet Chief Jorge Capitanich told reporters at his daily briefing. He said Economy Minister Axel Kicillof will not participate.

U.S. District Judge Thomas Griesa has ruled Argentina must immediately pay the group of holdouts, led by hedge funds Elliott Management Corp and Aurelius Capital Management, the full value of their bonds, worth $1.33 billion plus accrued interest.

Argentina has said this was impossible as it could prompt claims totalling more than $100 billion. The country now has just $29.5 billion in reserves.

For years, Argentina has refused to negotiate with the holdouts, portraying them as "vultures" circling the corpse of its 2002 default that plunged millions of Argentines into poverty, and buying bonds in the secondary market at a steep discount.

But faced with the spectre of default, it now says it is willing to talk, and wants to complete a deal with all of its creditors, including other holdouts and the investors who accepted the tough terms of its 2005 and 2010 debt swaps.

Creeping optimism Argentina will reach a deal sent benchmark Discount bonds up 5.7 percent to 93.50 on the local over-the-counter market on Thursday, while Par bonds rose 8.10 percent to 53.40.

Griesa appointed Pollock to find common ground in the years-long battle that has delayed Argentina's return to international capital markets since its 2002 banishment.

Kicillof, who has settled disputes with the Paris Club of creditor nations and Spain's Repsol in recent months in an attempt to regain the trust of foreign investors, spent four hours on Monday discussing the case with Pollack and described the session as an "important advance."

If Argentina does not complete a deal, Judge Griesa has said he will continue blocking it from making a coupon payment on its restructured bonds that was already due on June 30. A 30-day grace period ends July 30.

Both the holdouts and Argentina have sought to win over public opinion in recent weeks, spending around $1 million combined on full-page advertisements in major newspapers around the world to argue their cases. (Additional reporting by Sarah Marsh and Nessi Hernan; Editing by W Simon and J Benkoe)

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