(Adds creation of bondholder group, context)
By Daniel Bases
NEW YORK, July 14 Aurelius Capital Management,
one of the lead holdout creditors seeking to settle with
Argentina over sovereign debt payments from its 2002 default,
said on Monday the government faces a new crisis on July 30
unless it engages in serious negotiations.
Argentine officials and the holdout investors met separately
with a court-appointed mediator on Friday, emerging from his
offices after five hours of discussions with no resolution and
no further talks scheduled.
Both sides have ramped up the rhetoric to explain why they
are on one level eager to negotiate and on another at pains to
show why the other side is not engaging.
"Absent a deal, Argentina's next sovereign debt crisis will
start on July 30. There is still time to avoid that outcome, but
only if the Argentine government commences serious discussions
with us immediately," Aurelius said in a statement.
The firm said that together with other holdout creditors, it
has offered to meet with the government anytime, anywhere, but
has been rebuffed.
"Argentine officials refuse to meet with us or even
negotiate with us indirectly. Sadly, this approach gambles with
the livelihoods and futures of the Argentine people."
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.
Without a deal, Latin America's No. 3 economy risks tumbling
into a new default as it battles a recession, one of the world's
highest inflation rates and dwindling foreign reserves.
Argentine officials in Buenos Aires and in its Washington,
DC, embassy were not available for comment when contacted by
Argentina continues to request a stay, or suspension, of
Griesa's judgments while talks continue. That would give the
nation more time beyond a July 30 deadline for a coupon payment
to bondholders who agreed to two prior restructurings in 2005
The government says it cannot voluntarily offer better terms
for a restructuring with holdouts because of a provision called
the Rights upon Future Offers, or RUFO, which expires on
December 31. It is designed to stop anyone getting a better deal
than the exchange bondholders.
Legal experts have not dismissed the clause as a hurdle to a
deal, but they also believe it can be overcome.
The holdouts have said they would discuss an accommodation
to let the government pay the other bondholders facing potential
default if negotiations to settle the legal dispute have made
good progress before July 30. But they also argued to Griesa
that there were no grounds for granting a stay.
"On Friday Argentina's Ministry of the Economy issued yet
another statement calling for the pari passu injunction to be
stayed," Aurelius said. "This is puzzling, because the District
Court refused that stay just last month.
"Before that, the injunction had been stayed for nearly
2-1/2 years while Argentina took its appeals. During that
period, Argentina rebuffed countless settlement overtures, even
by the appellate court. Argentina has demonstrated itself wholly
undeserving of another stay now."
Argentine cabinet chief Jorge Capitanich made no mention of
the debt talks in his regular briefing on Monday morning.
Buenos Aires said in a statement on Friday that a stay is
"essential" given the size of the claims, and that it was
willing to continue talks but did not specify if it would or
when. It has also argued that it is being pushed into default by
During the World Cup final on Sunday, state-run Argentine
television once again screened a fiery, nationalistic
advertisement, playing sound bites of Latin American leaders
rallying behind the country in its battle against the holdouts.
Argentina argues that should it work out a deal with
holdouts, it would be subject to paying exchange bondholders
under RUFO as well as "other" holdouts with unrestructured debt
who are not part of the Elliott/Aurelius group.
The government puts its liability for "other" holdouts at
$15 billion, but Moody's Investors service says the claims total
half that amount - $7.5 billion if all the unrestructured debt
under New York law is claimed. That figure rises to $12 billion,
Moody's said, if all holdout claims in U.S. dollars and euros
were to seek payment.
Global law firm Bingham McCutchen said in a statement late
on Sunday that it organized what it called an Ad Hoc Group of
Argentina's "other" holdouts. It invited others to join in an
effort to build a stronger bargaining position for any potential
(Additional reporting by Sarah Marsh in Buenos Aires; Editing
by Lisa Von Ahn and Dan Grebler)