(Adds Kicillof comments to diplomats in NY, details on special
master's statement on conversations with counsel for both sides)
By Daniel Bases and Rodrigo Campos
UNITED NATIONS, June 25 Argentina's Economy
Minister Axel Kicillof warned United Nations diplomats on
Wednesday the country is being pushed toward a new default after
a U.S. Supreme Court decision favored holdout creditors seeking
payment on bonds it defaulted on in 2001-2002.
Referring to those creditors as "vulture funds," Kicillof
said the June 16 decision by the top U.S. court to deny
Argentina the chance to appeal a lower court ruling means it
faces an insurmountable payment to all bondholders, given it has
just $28.5 billion in foreign currency reserves.
"So probably this is going to push us into a technical
default," Kicillof said through an interpreter. "Whichever way
you look at it this ruling is forcing Argentina towards the risk
of economic crisis."
The holdouts are led by Elliott Management's NML Capital and
Aurelius Capital Management.
"Once these funds get recognition of 100 percent of the
value of their bonds, which were purchased under vile conditions
of having paid only 30 cents on the dollar, there could be more
demand from other holders who did not participate in the
restructurings," Kicillof said.
He was speaking to members of the Group of 77 plus China
meeting at the U.N. in New York. It was not clear if he would
meet with holdout creditors while in the city.
U.S. District Judge Thomas Griesa of the Southern District
of New York had ordered Argentina to pay the holdouts $1.33
billion plus accrued interest, at the same time it pays the 93
percent of bondholders who accepted the terms of the sovereign
restructuring in 2005 and 2010.
Argentina is due to make a $900 million coupon payment on
June 30, but has a 30-day grace period in which to come to an
agreement with the holdouts. They have written to Judge Griesa
saying they would discuss an accommodation with Argentina if
good progress is made in any talks.
Daniel Pollack, the court-appointed special master in the
dispute, issued a statement on Wednesday confirming a Reuters
report that he had met with lawyers from both sides on Tuesday.
"No resolution has been reached," the statement said, adding
that he also spoke with both sides in phone calls in the last 48
While in New York, Kicillof will also meet with lawyers for
the Argentine government a government source in Buenos Aires
told Reuters on Tuesday, but it is unclear whether he will meet
with holdout investors.
Attempts to contact the holdout investors on Wednesday were
Argentina says it is being ordered to pay the holdouts $1.5
billion while the holdouts contend that by June 30th the figure
will have risen to $1.65 billion because of accrued interest.
Argentine officials, including President Cristina Fernandez,
have said the country will not pay these investors, arguing it
could face potential demands for up to $15 billion from other
holdouts not involved with the case - an amount representing
more than half of the government's $28.5 billion in foreign
The United Nations trade agency, or UNCTAD, weighed in on
the case on Wednesday, echoing concerns voiced by the United
States as well as the International Monetary Fund that the
ruling in favor of holdouts erodes sovereign immunity and is a
setback for the debt restructuring process.
However, investors and legal advisors alike note changes to
the covenants in bond contracts have adapted to avoid such
disputes and the legal battle with Argentina is so unique that
chances for a repeat situation have been dramatically reduced.
One indication that bonds issued under New York law are not
being shunned, at least not so far, is last week's well-received
10-year issue by Ecuador. This came after Ecuador selectively
defaulted on its debt in 2008, calling debtholders "monsters,"
and saying that the debt issued by past governments
"It is kind of ironic that the day after the Supreme Court
came with this decision, we had not Peru, not Colombia, not
Mexico, not even Brazil; we have freakin' Ecuador coming to the
market with a $2 billion (bond) with a yield of less than 8
percent, and the deal was absorbed very well and the bond is
flying now," Javier Kulesz, emerging market credit analyst at
Nomura Securities, said at a recent forum in New York.
Despite the tough public stance, markets believe the parties
will eventually negotiate a solution.
The price on Argentina's U.S. dollar-denominated 2033
discount bonds last traded at 87.5 cents on the dollar, yielding
9.93 percent. That is little changed on the day,
but just off Monday's high when it hit its best levels since
When the threat of a possible default rose one week ago, the
price of those bonds slid to about 73.4 cents.
The cost of insurance against a default on the country's
debt has dropped in recent days. The annual cost to insure $10
million in bonds was about $1.397 million, down from $2.805
million last week.
(Reporting by Daniel Bases, Rodrigo Campos, Joseph Ax in New
York, Jeremy Gaunt in London and Tom Miles in Geneva; editing by
G Crosse, Chizu Nomiyama, Meredith Mazzilli and Richard Chang)