(Adds holdout creditors organizing new negotiating committees)
By Hugh Bronstein
BUENOS AIRES, July 8 Argentina said on Tuesday
it would meet with a mediator for the second time this week in
the country's dispute with "holdout" investors, lifting market
hopes for a deal needed to avoid another painful debt default.
With the economy already in recession, President Cristina
Fernandez's cash-strapped government has until July 30 to reach
an agreement with hedge funds who refused to participate in the
country's earlier debt restructuring and have been suing for
full repayment of sovereign bonds which Argentina defaulted on
On Argentina's local over-the-counter market, benchmark
Discount bonds rose 1.60 percent to 88.65 while
Par bonds were up 1.32 percent to 49.90. Traders
cited optimism over the talks as the reason for the climb.
Argentina's cabinet chief Jorge Capitanich did not say
whether the holdout funds led by Elliott Management Corp and
Aurelius Capital Management would participate in Friday's
meeting. There was no immediate comment from the funds.
Other holdout investors with over $6 billion worth of
unrestructured Argentine debt have started organizing
negotiating committees, encouraged by Buenos Aires' stated
desire to settle with 100 percent of its creditors.
The government has said that settling with funds led by
Elliott would carry the risk of opening Argentina to a slew of
suits from other holdouts.
On Monday, Argentina's Economy Minister Axel Kicillof spent
four hours discussing the case in New York with the mediator,
Daniel Pollack, who was appointed by U.S. District Judge Thomas
Griesa to find common ground in the years-long dispute.
"It was agreed to continue this meeting on Friday,"
Capitanich said. "It has been an intense dialogue."
Kicillof flew back to Buenos Aires on Tuesday and described
the session with Pollack as "an important advance".
"We will go back on Friday," Kicillof told reporters.
In the last few months Kiciloff has settled long-standing
disputes with the Paris Club of creditor nations and Spanish oil
major Repsol in a bid to lure investors back to
But his stance toward the holdouts was anything but
conciliatory on Tuesday. "They are trying to extort a sovereign
country," he said in a statement on the presidential website.
Without a deal this month, a court ruling by Judge Griesa
would prevent the country from making coupon payments to
creditors who accepted a large writedown on their debt holdings
after 2002. That would put Argentina in default.
PAYMENT IN LIMBO
More than 92 percent of creditors accepted less than 30
cents on the dollar in restructurings worked out in 2005 and
2010. The holdouts shunned those terms and sued for full
repayment plus interest, but they say they are willing to
negotiate with the government.
Judge Griesa blocked a June 30 coupon payment that Argentina
tried to make on the restructured bonds, triggering the start of
a 30-day grace period ending July 30.
Argentina is being pushed into talks after refusing for
years to negotiate with the holdouts, portraying them as
"vultures" circling the corpse of the country's 2002 default as
most bought the bonds in the secondary market at a discount.
Fernandez's government says Griesa overstepped his powers by
blocking the coupon payment.
Argentina published a two-page legal notice in the New York
Times on Tuesday, saying it "duly deposited the amounts of
interest due on the New Debt Securities issued within the
framework of the 2005 and 2010 Sovereign Exchange Offers."
It said that Bank of New York Mellon, the trustee bank, is
required to distribute those funds to bondholders, calling BONY
Mellon's failure to do so a "violation of its obligations".
BONY Mellon had no comment on the legal notices from the
government. A source with direct knowledge of the situation said
the bank will file a motion to Judge Griesa on Thursday seeking
guidance on what it should do with the money.
(Additional reporting by Jorge Otaola and Richard Lough in
Buenos Aires and Daniel Bases in New York; Editing by Andrew