August 13, 2014 / 9:36 PM / 3 years ago

UPDATE 1-Aurelius sees no realistic private solution in Argentine dispute

(Adds more comment, background)

By Daniel Bases

NEW YORK, Aug 13 (Reuters) - Argentine holdout creditor Aurelius Capital Management said on Wednesday that talks with many financial institutions about finding a private settlement solution to the sovereign debt dispute had garnered no realistic proposals.

Argentina fell into default for a second time in 12 years after missing a July 30 coupon payment on already restructured sovereign bonds. After the deadline passed, hopes turned toward proposals drawn up first by Argentine and then by large international banks to work out a solution.

“That engagement has convinced us that there is no realistic prospect of a private solution,” Aurelius said in a statement.

“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 One proposal was withdrawn before we could even respond.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 statement said.

The current default stems from a 2012 ruling by U.S. District Judge Thomas Griesa, who ordered Argentina to pay these holdout creditors $1.33 billion plus interest at the same time it made regularly scheduled coupon payments on its debt.

Buenos Aires, having run out of legal recourse in the United States, deposited its $539 million coupon payment with trustee Bank of New York Mellon but did not make the corresponding payment to the holdouts. Griesa called the deposit illegal

Griesa’s order blocked the deposit from being distributed to bondholders and weeks of talks between the two sides before the deadline, under the aegis of the court-appointed mediator Daniel Pollack, failed.

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 defaulted Argentine debt from 2002.

They claimed in a June 24 letter to Griesa that with past due interest, the award would be approximately $1.65 billion by June 30. That figures has not yet been affirmed by the court.

These two deep-pocketed firms, known as distressed debt investors, have been dubbed “vultures” by Argentina, which accuses accuse them of picking over the ruins of their economy following the near-$100 billion default in 2002 in pursuit of huge profits. Opinion polls show most Argentines side firmly with the government.

Argentina claims it cannot pay the holdouts on what would be better terms than the investors who exchanged their defaulted bonds in 2005 and 2010 under the so-called RUFO clause (Rights Upon Future Offers).

“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.

Since the default, Argentina has claimed it is not in default because of its deposit, while also disparaging Griesa and Pollack. Griesa warned he could find them in contempt of court if they did not stop making “misleading statements.”

“The Argentine people have already paid a dear price for their leaders’ hubris,” Aurelius said. “With Argentina yet again defaulting on its bonds, we fear the worst is yet to come.” (Reporting By Daniel Bases; Editing by Jonathan Oatis)

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