By Daniel Bases and Alejandro Lifschitz
NEW YORK/BUENOS AIRES, July 25 Argentina failed
to reach a breakthrough with the U.S. court-appointed mediator
in its battle with holdout creditors on Friday in talks that
lasted just an hour, suggesting a settlement to avoid a default
next week remains elusive.
The Argentine delegation headed home to seek instruction
from the government after the talks in New York, mediator Daniel
Pollack said, while the country's economy ministry underscored
it would continue the dialogue with him over the next few days.
Earlier this week, U.S. District Judge Thomas Griesa ordered
Argentina and holdout creditors who have rejected its debt
restructurings to meet continuously with Pollack to try to reach
a deal and avoid the country's second default in 12 years.
If they fail to reach a deal and holdouts do not ask for a
suspension of Griesa's ruling to pay them back in full on their
defaulted bonds, the judge will prevent Argentina from making a
July 30 deadline for a payment on its exchanged bonds.
"No resolution of the impasse between the parties has been
reached. Consistent with Judge Griesa's direction of earlier
this week in open Court, I anticipate that there will be further
communications with the parties prior to the Default date (July
30)," Pollack said.
News that the meeting was over so quickly sent Argentina's
bonds reeling. Over-the-counter Discount bonds
fell 5.6 percent by 1900 GMT while Par bonds slid
Pollack said the holdout hedge funds, who bought Argentine
notes on the cheap after the country's 2002 $100 billion default
and spurned the terms of its 2005 and 2010 restructuring deals,
were not present at the meeting.
However he briefed them by telephone and they reiterated
their "availability and willingness to meet with, and,
indeed, with representatives of the Republic, at any time".
The government portrays the funds as "vultures" picking over
the carcass of its default that sent millions of Argentines into
poverty. It has refused to talk directly with them.
"The process of dialogue initiated with the mediator will
continue in the next few days," the economy ministry said.
Griesa ordered in 2012 that Argentina pay the holdouts $1.33
billion plus accrued interest - a ruling Latin America's No. 3
economy says it cannot comply with
One of the lead holdouts, NML Capital Ltd, an affiliate of
billionaire Paul Singer's Elliott Management Corp, said
Argentina's government had made clear "that it will be choosing
default next week."
Another default would pile more pain on an economy grappling
with one of the highest rates of inflation in the world, an
ailing currency and dwindling foreign reserves after a long
banishment from global capital markets.
Economy Minister Axel Kicillof told finance officials from
across South America that Argentina would negotiate but that any
talks must be held under fair conditions.
He said Griesa's order was "unprecedented and impossible to
Argentina has previously said it needs more time to reach a
deal, in part because it worries that it risks running afoul of
the so-called RUFO provision in the restructurings, that bars it
from voluntarily offering better terms to investors than those
it gave in the restructurings.
More than 90 percent of investors agreed to accept less than
one-third the original value of their bonds in those swaps.
Argentina argues it would open itself up to challenges from
creditors amounting to anywhere from $120 billion to $400
billion if it broke the RUFO. The clause expires on Dec. 31.
With just five days until the July 30 deadline, the odds of
a default have sharply increased.
Earlier this year, Argentina unexpectedly struck a deal with
Spanish oil major Repsol to compensate it for the
nationalization of energy company YPF. It also reached
an agreement with the Paris Club of creditor nations.
(Additional Reporting by Sarah Marsh and Richard Lough in
Buenos Aires; Editing by Steve Orlofsky and Andrew Hay)