(New throughout, adds comment, Kicillof visit to Washington,
details, CDS price)
By Daniel Bases
NEW YORK, June 30 Holdout investors in Argentine
sovereign debt said on Monday they have not met with the
government to negotiate a settlement on defaulted debt, and
accused Buenos Aires of refusing to enter talks as a 30-day
countdown to default begins.
Holdout investors are led by Elliott Management's NML
Capital Ltd and Aurelius Capital Management, two hedge funds
that specialize in buying up deeply discounted or distressed
debt and negotiating profitable settlements, often through the
use of the courts.
"Argentina's professed willingness to negotiate with its
creditors has proven to be just another broken promise. NML is
at the table, ready to talk, but Argentina has refused to
negotiate any aspect of this dispute," said Jay Newman, senior
portfolio manager at Elliott Management.
"We sincerely hope it reconsiders this dead-end path,"
Newman said, noting there have been no negotiations so far and
the government has refused to commit to negotiations in the
Argentina late on Monday said it would send a delegation to
New York to meet on July 7 with court-appointed mediator Daniel
Pollack. It made no mention of whether it would sit down with
"Argentina is reiterating its desire to negotiate according
to just, equitable and legal conditions that take into account
the interests of 100 percent of creditors," the economy ministry
said in a statement.
In 2012, U.S. District Judge Thomas Griesa in New York
awarded the holdouts $1.33 billion plus accrued interest in a
case based upon the pari passu, or equal treatment, clause used
to sell the bonds originally in 1994.
The award, which says Argentina must make payment to
holdouts at the same time it pays investors who accepted two
sovereign debt restructurings in 2005 and 2010, was upheld on
appeal and denied a hearing by the U.S. Supreme Court,
effectively exhausting Argentina's U.S. legal recourse.
Last week Argentina defied Griesa and made a scheduled
coupon payment of $539 million due June 30 on restructured
bonds, saying it was bound by Argentine law to make the payment.
The money was deposited in the Bank of New York Mellon's
account at the Central Bank of Argentina without making the
court-ordered payment to holdout investors at the same time.
In total the government transferred $832 million for payment
to various bondholders last week.
As a result of Griesa's ruling, U.S. banking institutions
are blocked from making delivering payments to exchange
bondholders. BNY Mellon told Griesa on Friday it did nothing
with the deposit.
A BNY Mellon spokesman told Reuters the bank had no further
comment beyond a notice issued Monday to exchange bondholders
stating the court order stopped it from making the payments.
Now the clock starts on a 30-day grace period for Argentina
to either come to an agreement with holdouts and unblock payment
to exchange bonholders by July 30 or default on its bonds for a
second time in 12 years.
Griesa named Pollack, a veteran New York financial trial
lawyer, to try to mediate a settlement between Argentina and the
Argentina defaulted on roughly $100 billion in sovereign
debt in 2001-2002 and negotiated a restructuring with eventually
93 percent of bondholders in a deal widely considered one of the
most onerous for investors in history, paying between 25 and 29
cents on the dollar.
Griesa on Friday called Argentina's deposit with BNY Mellon
illegal and said that the money should "be returned to the
Republic, simple as that."
Argentina responded saying the deposited money no longer
belonged to the government. Its status remains unknown.
"The Argentine government seems determined to cause many
billions of its debt to accelerate on July 30 and start yet
another Argentine debt crisis. This is completely avoidable. An
eminently affordable settlement can be reached with the
holdouts, yet Argentina's administration refuses even to meet,"
Mark Brodsky, chairman of Aurelius said in a statement.
The cost to insure a portfolio of Argentine sovereign debt
has risen in the last week. An investor wanting to insure a $10
million trade for one year would need to spend $2.92 million as
an up front cost plus an additional $500,000, according to data
provider Markit on Monday.
DEFAULT COUNTDOWN STARTS
The failure to deliver the coupon payment on restructured
bonds by the end of business on Monday means Argentina is
technically in default.
Varun Gosain, a portfolio manager at New York-based
Constellation Capital Management with investments in Argentine
assets who participated in the debt exchanges, is not
necessarily reconciled to a default in 30-days.
"Both parties have incentives to try and move things
forward. You don't need an agreement by July 30th, but you need
everybody to think it is better to keep negotiating," he said.
Argentina says it cannot voluntarily offer better terms for
a restructuring with holdouts because of a provision called the
Rights upon Future Offers (RUFO), which expires on Dec. 31. It
is designed to stop anyone getting a better deal than the
"I think RUFO is a big concern. Any agreement has to
negotiate around it and if is not properly dealt with it could
create a big contingent liability," said Gosain.
Argentina says an agreement with holdouts would open it to
the risk of claims from other holdouts as well as exchange
bondholders that would bankrupt the country.
On June 25 Economy Minister Axel Kicillof came to New York
for 10-hour visit to speak at a meeting of the G77 plus China
Committee at the United Nations. He said the country was being
pushed into default though he did not meet with holdouts.
When Kicillof announced money was deposited with BNY Mellon,
the government issued a statement mentioning "eventual judicial
actions that would allow us to exercise our rights as a member
of the international community ... before the International
Criminal Court in the Hague."
This hints the government might try to take a new legal
avenue to avoid the U.S. court order.
Kicillof is due back in the United States on Thursday to
attend an Organization of American States meeting in Washington.
(Additional reporting by Hugh Bronstein, Alejandro Lifschitz,
Sarah Marsh and Jorge Otaola in Buenos Aries; Editing by Chizu
Nomiyama, W Simon and Andrew Hay)