(Adds mediator expects more talks, pro-government rally)
By Joan Magee and Daniel Bases
NEW YORK Aug 12 International banks are
struggling to reach a deal to buy a chunk of Argentine sovereign
debt held by New York hedge funds suing the country, dampening
market hopes for a swift end to the country's latest debt
Citigroup, Deutsche Bank, HSBC and
JP Morgan offered the holdout hedge funds 40 cents on
the dollar for the roughly $1.66 billion of bonds, including
interest, and raised the offer to 50 cents on Monday, sources
told Thomson Reuters IFR.
Those negotiations are taking place parallel to faltering
talks between Argentina and the holdouts led by Elliott
Management Corp and Aurelius Capital Ltd.
Daniel Pollack, the U.S. court-appointed mediator overseeing
the negotiations, told Reuters he expected more meetings with
both sides, though he did not say when.
Monday's offer from the banks to the holdouts, who bought
the bonds on the cheap during and after the country's 2001-2002
economic crash, remained far below the 80 cents first proposed
"These are not fully-baked proposals," a source from one
holdout firm told IFR.
Local Argentine bonds fell more
than 1 percent on the day and the peso currency weakened
on pessimism over a potential deal.
"Just when it looked like we might see a deal with the
holders of the defaulted bonds, it vanished," said a research
note from Buenos Aires brokerage Allaria Ledesma and Co.
"GRIESA IS WRONG"
The banks may be nervous about what reassurance they can
obtain from Argentina that it will buy the debt back from them,
and at what price.
"Our insecurity and the insecurity of the banks has been
that the government hasn't given any indications regarding price
points or structure once January hits," a source close to the
Argentina's latest debt crisis stems from its record $100
billion default in 2002. It restructured most of that debt in
bond swaps that gave investors less than 30 cents on the dollar.
But the holdouts went to court for full payment.
In 2012, a U.S. judge, Thomas Griesa, ruled Argentina could
not repay holders of restructured debt without paying the hedge
funds at the same time.
The government says it met its obligations to holders of
exchanged debt when it deposited $539 million into the account
of an intermediary bank for a June 30 coupon payment. But Griesa
called the deposit illegal and blocked it.
The defiant stance of tough-talking President Cristina
Fernandez against the funds she calls "vultures" has won growing
support among Argentines, opinion polls show.
Several thousand government supporters beating drums and
waving banners gathered in an entertainment hall in the
Argentine capital on Tuesday, backing Fernandez's refusal to
obey Griesa's order and pay the holdouts.
They filed past trash cans adorned with posters carrying the
slogan "Fatherland versus Vultures" and showing the judge's face
superimposed onto the scavengers. The Argentine government has
accused Griesa of bias in favour of the funds.
"What country is in default if you've paid," said
59-year-old Juan Carlos Satta, echoing an oft-repeated
government line that Argentina has honoured its debt payments.
"Griesa is wrong."
(Additional reporting by Davide Scigliuzzo of Thomson Reuters
IFR in New York and Walter Bianchi and Richard Lough in Buenos
Aires; Writing by Richard Lough; Editing by Steve Orlofsky and