(Adds Argentine economy ministry statement, rating change)
By Daniel Bases and Sarah Marsh
NEW YORK/BUENOS AIRES, July 1 Argentina's past
deals to settle claims with Spanish oil major Repsol SA and the
Paris Club of creditor nations could serve as examples of how to
negotiate a settlement to a decade-old debt dispute, one of the
lead holdout bondholders said on Tuesday.
Argentina faces a potential default unless it reaches a deal
with holdout investors by July 30 when it must make a payment on
its restructured sovereign debt. The holdouts rejected previous
restructuring deals Argentina offered after it defaulted on
about $100 billion in 2001-2002.
Standard & Poor's rating agency placed Argentina's 'CCC-/C'
unsolicited long- and short-term foreign currency ratings on
"CreditWatch" with negative implications on Tuesday, citing
likelihood of a default in interest payments.
Jay Newman, senior portfolio manager at Elliott Management,
one of the lead holdouts in the sovereign debt dispute with
Argentina, told CNBC TV Argentina's deal with the Paris Club was
"important and illustrative" for a possible agreement.
"Argentina recognized after also about the same amount of
time we have been dealing with our claims, recognized the total
claim of the Paris Club, principal, interest, and penalties,"
However, Argentina awarded Repsol only 50 percent
of what it had originally demanded for Argentina's seizure of
its YPF subsidiary.
Argentina was ordered by U.S. District Court Judge Thomas
Griesa in New York in 2012 to pay the holdouts, led by Elliott
Management Corp and Aurelius Capital Management, $1.33 billion
plus accrued interest.
Argentina must pay holdouts at the same time it pays
investors who accepted swaps in 2005 and 2010. Griesa's ruling
was upheld on appeal and denied a hearing by the U.S. Supreme
Court, effectively exhausting Argentina's U.S. legal recourse.
A deal with the holdouts would be the final element in a
campaign by the government to clear up its arrears and allow it
to re-enter the international capital markets for desperately
needed cash to help fund development, especially the massive
Vaca Muerta shale oil and gas field in Patagonia.
The Argentine economy ministry, which said on Monday it
would send a delegation to New York next week to meet with a
court-appointed mediator, said late on Tuesday the holdouts had
asked Griesa in writing to ensure its payments on restructured
debt did not reach exchange bondholders.
This was proof, the ministry said in a statement, that the
holdouts did not want to "reach a just, equitable and legal
solution that respects the interests of 100 percent of
Economy Minister Axel Kicillof's deal in February with
Repsol ended a two-year dispute and led to the Argentine
government issuing $5 billion worth of bonds in compensation.
Those bonds are governed by Argentine law, putting them out
of the reach of U.S. courts, and were later sold by JPMorgan
with the cash going to Repsol.
Kicillof also settled arrears of nearly $10 billion with the
Paris Club by agreeing to make payments in cash installments.
Paris Club rules forbid any reduction in the value of the
country's debt without a program under the auspices of the
International Monetary Fund, something Argentina would not
On Monday, Newman complained Argentina had not met with him
or the other holdouts. Argentina announced the delegation's trip
to New York several hours later although it has not said if the
team would meet face-to-face with the holdouts and has not named
In a statement issued on Tuesday, Mark Brodsky, chairman of
Aurelius Capital Management, voiced skepticism.
"I predict Argentina will not send a delegation ... next
week, or will send one without any authority to depart from the
prior exchange offer terms. Either way, Argentina's government
seems determined to plunge the country into a completely
avoidable crisis on July 30," Brodsky 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
Last week Argentina defied Griesa and made a scheduled
coupon payment of $539 million due June 30 (with a 30-day grace
period) 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.
Griesa said the deposit was illegal and the money should
"simply" be returned to the government.
That deposit, made up roughly of $232 million and 225
million euros ($308 million), has not moved from the account
because no formal order has been issued by Griesa to return it
to the government, sources familiar with the situation said. The
sources spoke on condition of anonymity given the unsettled
legal matter. One said: "This is a fairly unique situation."
The Argentine economy ministry said on Tuesday the Bank of
New York Mellon rejected an unspecified proposal by holdouts to
ensure payment did not reach exchange bondholders.
(1 euro = $1.3687)
(Additional reporting by Hugh Bronstein in Buenos Aires and by
Devika Krishna Kumar in Bangalore; Editing by Chizu Nomiyama, W
Simon and Andrew Hay)