NEW YORK, Aug 14 (IFR) - Argentine debt talks collapsed due
to disagreements over the price of its bonds and the absence of
a government guarantee to honor payments on them, sources close
to the discussions said.
International banks had appeared to be nearing agreement to
buy Argentina paper from holdout creditors who have refused to
accept a debt restructuring deal with the sovereign.
There were hopes a deal between Citigroup, Deutsche Bank,
HSBC and JP Morgan on one side, and litigant investors led by
Elliott Management and Aurelius Capital on the other, could come
But the two sides could not agree on price, particularly as
the government assurances weren't explicit or strong enough to
justify a higher valuation, the sources said.
An initial offer of 80 cents on the dollar for the bonds was
virtually halved to around 40 and 50 cents amid uncertainty over
whether Argentina would actually pay the bonds - US$1.33bn plus
accrued interest - next year.
For its part, Argentina was thought to be unwilling to
provide a guarantee of payment to banks for fear of violating
the RUFO clause, which expires at the end of the year and
requires it to offer equal terms to restructured bondholders as
"None of the big banks want to hold illiquid assets
forever," said Jorge Piedrahita, CEO at Torino Capital, a broker
dealer focused on emerging market debt.
"You want more than a nod and a wink from (Argentine
President) Cristina (Fernandez de Kirchner)," he said. "And that
was not coming from the government."
One source told IFR: "There's no way an international bank
can bridge funding when Argentina is looking riskier and
Holdout sources denied market rumors that Aurelius and
Elliott themselves had been unable to agree on an offering price
for the debt.
Heated public rhetoric from government officials also did
little to assure participants that the sovereign was supportive
of a deal, the sources told IFR.
After weeks of government accusations that the US
court-appointed mediator for the debt talks was "incompetent"
and "biased", cabinet chief Jorge Capitanich was quoted Thursday
morning saying that his country was "in the hands of an
international financial power comprised of small, voracious
interests that form a real international mafia".
"Part of the problem is the Argentine government's
rhetoric," one of the holdout sources said.
"Combined with the government's track record of never being
willing to negotiate with bondholders, how can any third party
believe that the Kirchner administration will honor these
Holdout creditors have said they would be open to a hybrid
deal involving payment with bonds. This is how Argentina paid
settled claims due to the Paris Club and Spain's Repsol as
compensation for the 2012 expropriation of its majority stake in
However such a deal could only be cut with the government,
which has clung to the idea that the RUFO clause, which expires
in December, impedes it from offering better terms to the
holdout investors. Such a move would trigger the RUFO clause and
expose it to billions of dollars worth of claims.
Citigroup, Deutsche Bank, HSBC and JP Morgan declined to
(Reporting by Joan Magee; Editing by Paul Kilby and Marc