NEW YORK, July 31 (IFR) - International banks could be
joining the effort to buy up the Argentine debt from sovereign's
holdout creditors and resolve the messy default standoff,
multiple sources said Thursday.
Just as Argentina went into its second default in 13 years
following a bitter legal fight in the US courts, third-party
banks were said to be mulling an offer to buy the bonds.
The wrangling over the debt in question - most of it bought
on the cheap by hedge funds - led Argentina to miss a payment
this week on other restructured debt and thus go into default.
A last-ditch effort by domestic Argentine banks to buy the
debt, and allow the sovereign to save face by not paying in full
the "vulture funds" that are holding out, failed on Wednesday.
"There has to be a way to broker a private solution," said
one bank managing director.
"There is a stigma in the eyes of the Argentine government
about paying the so-called vulture funds; they see that as a
defeat. It's all psychological."
Sources said the local banks were also still in the running
for the roughly US$1.6bn purchase, which would account for par
value of the bonds plus accrued interest.
Argentine newspaper Ambito named JP Morgan, Citi and HSBC as
potential suitors for the holdout bonds.
A source at JP Morgan told IFR to take the report with "a
grain of salt" but did not rule out that conversations were
"Any foreign bank going in to buy this debt would be doing
so as a pure business transaction," a managing director at
another bank said.
Argentina has repeatedly argued that the so-called RUFO
clause on its restructured debt means that it cannot obey a US
court order to pay the holdout creditors in full.
The clause, which stipulates that the sovereign must offer
the same terms to exchange bondholders as it does to holdouts,
expires at the end of 2014.
"There needs to be an assurance from Argentina to any
third-party buyer - whether it's a local bank group or foreign
bank subsidiary, or anyone - that once January 1 hits and the
RUFO clause expires, the country won't try to do some form of
financial engineering and convert them into local-law bonds or
tell them to take the deal at 25 cents as other people did," the
managing director said.
"The buyer would have to go on blind faith," he said.
"Argentina may have taken the idea of default a little too
(Reporting by Joan Magee; Editing by Marc Carnegie)