(Recasts with holdout statement on no viable private solutions,
adds byline and dateline)
By Hugh Bronstein and Daniel Bases
BUENOS AIRES/NEW YORK Aug 13 Prospects for a
private sector solution to Argentina's sovereign debt dispute
deteriorated on Wednesday after holdout investors said they
entertained no realistic offers from bankers while the
government dashed hopes it might soon agree to restart talks.
The country's peso currency hit a record low on fears that
the already years-old debt saga would linger on indefinitely.
Addressing rumors in the marketplace of offers from big
international banks to buy up its position in defaulted debt,
one lead holdout investor said after many meetings nothing
presented made sense for a settlement on bonds dating back to a
near $100 billion default in 2002.
"That engagement has convinced us that there is no realistic
prospect of a private solution," Aurelius Capital Management
said in a statement.
Aurelius is run by Mark Brodsky, who, along with his former
firm Elliott Management Corp, have waged a decade-long battle in
the U.S. courts to collect on the defaulted Argentine debt they
have owned and purchased at steep discounts over the last 12
years. The holdouts spurned two prior restructurings, holding
out for better terms.
"No proposal we received was remotely acceptable. The
entities making such proposals were not prepared to fund more
than a small part, if any, of the payments they wanted us to
accept. One proposal was withdrawn before we could even respond.
And no proposal made by us received a productive response," the
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.
A second default occurred after Argentina missed a July 30
deadline for coupon payments on bonds restructured in 2005 and
2010. After the deadline passed, hopes turned toward proposals
drawn up first by Argentina and then by large international
banks to work out a solution.
By clearing up the default with the holdouts from the 2002,
Argentina would be able service its restructured debt.
Argentina claims it cannot pay the holdouts on what would be
better terms than the investors who exchanged their defaulted
bonds under the so-called RUFO clause (Rights Upon Future
"Argentine officials hide behind the RUFO provision but make
no effort to seek waivers from it (despite being offered them by
many of the exchange bondholders)," Aurelius said.
U.S. District Court Judge Thomas Griesa, who has presided
over the long-running legal battle, said on Friday he would
issue a contempt order unless Argentina stopped claiming it had
met its obligations and was not in default.
COMES OUT SWINGING
Argentina came out swinging on Wednesday against Griesa,
defying the threatened contempt order.
Far from backing off, Cabinet Chief Jorge Capitanich said
Griesa had not grasped the case's complexities and that no new
talks had been scheduled with the hedge funds.
"The proper conditions do not exist to negotiate,"
Capitanich told reporters in Buenos Aires.
Argentina's peso weakened more than 1.5 percent on Wednesday
to a record low 13.15 per U.S. dollar in unofficial trade
. Foreign exchange controls force most Argentines to buy
dollars on the black market, which is widely seen as a truer
rate of exchange than the official rate of 8.2750 per greenback.
In 2012, Griesa ordered Argentina to pay the holdout group
led by Aurelius and Elliott $1.33 billion plus interest and
barred it from repaying the holders of exchanged debt without
paying the holdouts too.
In June, Argentina deposited $539 million into the account
of an intermediary bank to make a June 30 coupon payment. Griesa
ruled the deposit illegal and ordered the money frozen.
As a result, Argentina effectively missed the payment. The
International Swaps and Derivatives Association (ISDA) will hold
an auction on Aug. 21 to settle Argentina's default swaps,
Thomson Reuters' IFR reported.
Holders of the restructured bonds have asked Griesa to allow
the intermediary bank to release the money, and Capitanich
criticized the judge for not acting on those requests.
"His lack of decision clearly comes from not understanding
the process, not understanding Argentina's status as a sovereign
country," Capitanich said.
Argentina derides the holdout funds as "vultures" out to
wreck the country's finances in their pursuit of huge profits.
Opinion polls show most Argentines side firmly with the
Economy Minister Axel Kicillof on Tuesday posted a drawing
on his Facebook page of a beady-eyed vulture wearing a shirt
with the letters "U.S.A." and emblazoned with the U.S. flag.
Next to the drawing are written the words "greed" and "cruelty".
Over-the-counter sovereign bonds traded in Buenos
Aires fell by an average 1.3 percent on the day.
(Additional reporting by Davide Scigliuzzo of Thomson Reuters
IFR in New York, Daniel Bases in New York, Sarah Marsh and
Walter Bianchi in Buenos Aires; Editing by Jonathan Oatis, Paul
Simao, Chizu Nomiyama, Peter Galloway and Bernard Orr)