NEW YORK, Aug 8 (IFR) - Investors, bankers and legal experts
are scrambling to find ways to end Argentina's decade-long legal
dispute with holdouts before acceleration complicates the
situation for all parties involved.
An all-inclusive debt exchange, a buyback of debt held by
holdouts and a waiver of the controversial RUFO clause are all
ideas being pushed forward.
Hopes that international banks would cut a deal to buy a
portion of the US$1.66bn in holdout claims lifted debt prices
last week as investors bet that such a solution would ultimately
cure the country's default
However, the threat of "me-too" claims and growing
scepticism over the government's ability to guarantee full
payment next year left strong doubts in many observers' minds
whether such negotiations would prove fruitful.
The best option on the table, say some observers, involves
recent efforts to collect signatures among creditors to waiver
the RUFO clause that requires Argentina to offer the same terms
to both litigants and holders of restructured debt.
The elimination of the RUFO clause would lift what the
government has often cited as a major stumbling block in its
ability to cut a deal with holdouts.
"The only more or less viable sign of progress is the
initiative by a substantial group of exchange bondholders to
solicit a RUFO waiver," said Carlos Abadi, CEO of ACGM, a
boutique investment bank.
In some observers' eyes, such a move would call the
government's bluff and prove whether or not it is genuine in its
gestures to negotiate with hedge funds led by Aurelius Capital
and NML Capital.
"It is true that a violation of RUFO could have severe
consequences for Argentina," said a lawyer working with holders
of Argentine debt. "But are they serious about the negotiations?
What is preventing from asking for a waiver?"
The initiative has been left in investors' court, where
creditors are already organising a consent solicitation to that
A waiver may seem like a tall order. After all there is some
US$56bn in restructured debt outstanding and a favourable
majority of creditors would be required.
But investors may find it in their best interest to agree.
Not only do they heighten their chances of getting paid, but
there would probably be considerable upside in secondary prices
on any good news about the waiver.
"I have always thought that it would be possible to get a
waiver for the RUFO clause," said the lawyer. "Exchange
bondholders have a serious interest in getting RUFO out of the
way and they may well be able to do this on their own."
The prospect of a waiver would also probably be welcomed by
US Court Judge Thomas Griesa, who has encouraged a settlement.
Should holdout negotiations or waiver attempts fail,
creditors may start accelerating bond payments, leaving
Argentina little choice but to offer an exchange to all
This would at least put all creditors on an even playing
field and allow Argentina to start anew.
"At that point, Argentina would be able to enter into
negotiation with all holdout investors instead of just the
plaintiffs, thus potentially increasing its relative bargaining
power," said Jan Dehn, head of research at Ashmore.
Implementing an exchange may prove tricky as banks with US
links could be unwilling to risk breaching the court ruling of
Griesa that prevents third parties from helping Argentina get
around his judgment.
(Reporting by Davide Scigliuzzo Christopher Spink; Editing by
Paul Kilby and Matthew Davies)