(Adds details, background, bond price, byline)
By Daniel Bases
NEW YORK, July 16 A U.S. judge said in New York
on Wednesday that he would hear arguments next Tuesday related
to the banks and payment agents caught up in Argentina's
sovereign debt case as a potential default looms at the end of
U.S. District Judge Thomas Griesa has received motions from
the Bank of New York Mellon , the indentured trustee that
currently holds a deposit from the government of $539 million in
its account at the Central Bank of Argentina, on what it should
do with the money.
In addition, the lead holdout, NML Capital Ltd, a subsidiary
of Elliott Capital Management, has filed a motion, as have
bondholders with euro-denominated Argentine debt, payment
systems Euroclear Bank, Clearstream Banking and JPMorgan Chase &
The holdouts are investors who spurned the terms of
Argentina's 2005 and 2010 debt restructuring following a $100
billion government default in 2002. Griesa has ordered that
Argentina either pay the holdouts $1.33 billion plus accrued
interest at the same time it pays restructured bondholders or no
one should be paid.
All sides face a July 30 deadline for Argentina to either
pay up, reach a deal with the holdouts or face default.
The two sides have met separately with court-appointed
mediator Daniel Pollack in New York but have yet to sit down and
have a face-to-face discussion, although both profess to want to
Argentina's U.S. dollar-denominated debt cut its losses
after word of the hearing came out given no further talks with
Pollack were publicly scheduled. The 2033 Discount bonds
snapped higher, to a small gain of 0.07 point in
price to bid 89.16 points. That drove the yield down to 9.7
percent from 11.30 percent.
Argentine officials have said they want to negotiate a deal
covering 100 percent of its bondholders, not just the holdouts.
For years, Argentina shunned negotiations with the holdouts,
portrayed by President Cristina Fernandez as "vultures" picking
on the bones of Argentina's shattered economy 12 years ago.
Holdouts have said they are willing to discuss an
accommodation to let the government pay bondholders who accepted
Argentina's restructuring terms as they face a default in two
weeks if negotiations to settle the dispute have made good
progress before the July 30 deadline.
The government says it cannot voluntarily offer better terms
for a restructuring with holdouts because of a provision called
the Rights upon Future Offers, or RUFO, which expires on Dec.
31. It is designed to prevent anyone from getting a better deal
than the exchange bondholders.
Legal experts have not dismissed the clause as a hurdle to a
deal, but they also believe it can be overcome.
Sources in the finance sector say there are perhaps half a
dozen banks preparing potential plans to present to Argentina
and the holdouts as part of a comprehensive plan for settling
the dispute should the legal hurdles such as RUFO be overcome.
While Argentina's legal recourse has been exhausted as the
holdouts' case has been upheld on appeal and denied a hearing by
the U.S. Supreme Court, they have taken their fight to the court
of public opinion.
Both sides have spent hundreds of thousands of dollars on
newspaper advertisements globally, arguing their sides of the
case in an effort to inoculate themselves against accusations
that they are at fault for any default.
The latest came on Wednesday with a full-page advertisement
placed in Argentina's El Cronista daily by the American Task
Force Argentina (AFTA), a lobbyist acting for the New York hedge
funds, saying, "Time is running out for Argentina."
Argentina's embassy to the United States in Washington
tweeted on Wednesday: "It is time for vultures to stop lying and
speculating with the future of 40 million Argentines."
(Reporting By Daniel Bases; Editing by Meredith Mazzilli and