(Adds additional details on talks)
By Daniel Bases and Jorge Otaola
NEW YORK/BUENOS AIRES, July 29 Several hours of
negotiations between Argentine officials and holdout investors
ended without a resolution, Economy Minister Axel Kicillof said
in New York on Tuesday, just a day before the nation faces a
Kicillof left the meeting at the court-appointed mediator's
office in Manhattan at about 11:20 p.m. EDT (0320 GMT), and
though he said both sides would meet again Wednesday, the
court-appointed mediator, Daniel Pollack, said in a statement
that details of such a meeting had not yet been determined. If a
deal is not reached, Argentina faces another default on its
"I cannot give information," Kicillof told reporters. "We
Tuesday's meeting was historic in that it was the first time
the opposing sides met for face-to-face talks. In a statement,
Pollack said whether the parties will meet again Wednesday
"remains to be determined overnight." Although the parties had a
"frank exchange of views and concerns," the issues dividing them
are still unresolved, he said.
NML Capital, a unit of Elliott Capital Management, and
Aurelius Capital Management, the two hedge funds central to the
legal battle, have said they are willing to negotiate a deal.
They were awarded $1.33 billion, plus interest, by U.S. District
Judge Thomas Griesa, who ordered Argentina to pay the holdouts
at the same time as investors who agreed to restructurings in
2005 and 2010.
After a long battle in the U.S. courts, the South American
nation is out of options: it has to either pay in full the hedge
funds that rejected its restructuring on their defaulted bonds,
cut a deal or win a stay of the court order that triggered the
According to bank sources and media, a group of private
banks in Argentina is set to offer to put up $250 million as a
guarantee to convince NML of Argentina's good faith and convince
Griesa to reestablish the stay.
Argentina's isolation from global credit markets since its
2002 default on $100 billion means a default would be highly
unlikely to cause financial turmoil abroad, but it would hurt a
domestic economy already in recession.
Kicillof's appearance at the office of the court-appointed
mediator presiding over the negotiations was his first in more
than three weeks. The scant progress made in talks, and
Kicillof's absence, had raised questions over Argentina's
commitment to reach a settlement with the holdouts.
The minister, who this year brokered deals with the Paris
Club of creditor nations and Spanish energy giant Repsol, made
no comment to reporters staking out Pollack's office.
Hopes that Tuesday's meeting in New York would see an accord
boosted sentiment on Argentina's blue chip MerVal stock index
which reversed early losses to close up 6.5 percent.
A default had been looking increasingly likely over the past
few days. Argentina's debt insurance costs hit six-week highs on
For many years, the country declined to negotiate with the
holdouts who bought its distressed debt on the cheap, slamming
them as "vultures" picking over the carcass of its default.
But after a slew of defeats in the U.S. courts,
tough-talking Fernandez has been forced to the negotiating table
just as her government battles runaway inflation and reserves
that hit an eight-year low this year.
Argentina has asked Griesa to stay his order for payment to
the holdouts to avoid triggering a clause, known as RUFO, or
rights upon future offers, that would cause it to sweeten the
terms for bondholders who already accepted the restructuring.
Separately, holders of Argentina's euro-denominated exchange
bonds earlier on Tuesday urged Griesa to facilitate a settlement
by suspending his ruling.
The veteran judge previously rejected Argentina's request
for a stay, but he could respond differently to bondholders.
The euro bondholders said they would facilitate a deal by
waiving the so-called RUFO clause that prevents Argentina from
offering other investors better terms than it offered them.
They would also try to get holders of exchanged bonds under
other legislations to waive the clause. "Obtaining a waiver of
the RUFO clause, however, will take time," they said.
In its latest legal maneuver, Argentina appealed a portion
of an order from Griesa on Monday permitting Citibank to pay
certain bond holders with funds deposited with the bank by the
The appeal appears to take issue with Griesa's warning that
his order permits Citi only to make the next scheduled payment
on July 30 but not subsequent payments.
Various South American leaders on Tuesday rallied behind
Argentine President Cristina Fernandez, castigating the holdouts
as financial speculators menacing the entire region.
"The problem that's affecting Argentina today is a threat
not just to a brother nation. It affects the entire
international financial system," Brazilian President Dilma
Rousseff said. "We cannot accept that the actions of a few
speculators put the stability of entire countries at risk."
Christine Lagarde, the head of the International Monetary
Fund, said on Tuesday that an Argentine default would unlikely
prompt broader market repercussions given the country's relative
isolation from the financial system.
Argentina's dollar-denominated Par bonds rose strongly on
Tuesday on the over-the-counter market as investors who expected
bondholders could accelerate the series in the case of a default
and call for immediate payment piled into the paper.
"If there is a default, and given the Par is the cheapest
series, they are acquiring these bonds," said Roberto Drimer at
the local consultancy VatNet.
Par bonds closed up 2.3 percent at $51.05
while Discount bonds were down 1.2 percent to
(Additional reporting by Svea Herbst-Bayliss in Boston,
Jonathan Stempel in New York, Diego Ore and Deisy Buitrago in
Caracas; Writing by Sarah Marsh and Richard Lough; Editing by
Leslie Adler, Andrew Hay & Shri Navaratnam)