(Adds president Fernandez's comments about U.S. judge Griesa)
By Richard Lough and Jorge Otaola
BUENOS AIRES Aug 7 Argentine bond prices and
stocks firmed on Thursday, with news that international banks
may be close to a deal to buy debt from holdout creditors that
would resolve its debt crisis.
The creditors are considering an offer from Citigroup,
JP Morgan, HSBC and Deutsche Bank of
80 cents on the dollar for their roughly $1.66 billion of
Argentine debt, Thomson Reuters IFR reported on Wednesday.
Argentina defaulted for the second time in 12 years last
week after the government said it could not reach a deal with
the holdout creditors, New York hedge funds that have been
demanding face value on bonds they bought on the cheap after the
country's economic crash in 2002.
Argentina's Economy Ministry declined to comment but has
said previously there was nothing to prevent private parties
from reaching an agreement.
In New York, Thomas Griesa, the U.S. district judge at the
center of the bitter legal feud between the two sides, said he
would hold a hearing on Friday at 3 p.m. (1900 GMT) to address
recent public statements by Argentina.
In comments late Thursday night, President Cristina
Fernandez goaded Griesa, calling him "a district judge who is
overriding the sovereignty of a nation."
"The decisions being made by this district judge don't make
any sense at this point," she added.
Both the dollar-denominated Par bonds and
Discount bonds rose almost 1 percent, while the
country's blue chip Merval index traded up 1.34 percent.
Gustavo Ber, an analyst at the Buenos Aires-based financial
consultancy Studio Ber, said "renewed hopes of a deal with
international banks" were driving Thursday's asset gains.
Which banks would ultimately purchase the debt remained
unclear, a source close to the negotiations told IFR.
"It could turn out to be only two banks that go in for the
final deal, with all the jockeying and various simultaneous
talks going on," said the source close to the situation.
JP Morgan, Deutsche Bank and Citigroup declined to comment
to IFR, while HSBC was not immediately available for comment.
Argentina fell into default after it missed a June 30
interest payment on restructured bonds following a ruling by
Griesa that it could not service the performing debt until it
had settled its legal battles with the holdouts.
Buenos Aires made the $539 million payment to a U.S.
intermediary bank to deliver to bondholders, but Griesa
blocked an onward transfer.
"There is no doubt whatsoever that the Republic of Argentina
has duly paid the amounts due on the exchanged bonds in the
manner required," the government said on Wednesday in a legal
notice to creditors who took part in 2005 and 2010 bond swaps.
The blocked funds belonged exclusively to the bondholders,
said Argentina, which has heavily criticized the judge and
labeled him an "agent" of the New York hedge funds.
Now that Argentina is in default, the holdouts may have lost
leverage. If no deal is reached quickly, other bondholders might
demand advanced full payment of the principal value of their
debt, a process known as an "acceleration."
That would potentially leave the funds, led by billionaire
Paul Singer's Elliott Management Corp and Aurelius Capital Ltd,
with nothing to show for a years-long courtroom fight.
The funds paid $48 million for the debt from 2001 to 2008
and would make a 1,600 percent profit if repaid in full,
Argentina has said. The government depicts the holdouts as
Sources told IFR the banks were unwilling to absorb all the
holdouts' debt and were offering 80 cents on the dollar, or
roughly $1.32 billion.
Brazil's state-owned Caixa Economica Federal and development
bank BNDES were supporting the talks, said a source close to the
institutions, as they seek to avert contagion across the broader
Latin American capital markets.
The government on Thursday began proceedings against the
United States over its sovereign debt crisis at the
International Court of Justice, the U.N.'s highest court for
disputes between nations, the tribunal said.
(Additional reporting by Joan Magee in New York and Davide
Scigliuzzo in London; Editing by Grant McCool, Steve Orlofsky
and Bernard Orr)