Argentina returns to NY for debt talks; to make offer this week

NEW YORK/BUENOS AIRES (Reuters) - Argentina’s government returned to debt talks in New York on Monday, expecting to make an offer this week to U.S. creditors suing over unpaid bonds hoping to resolve a decade-long stand-off that has locked the country out of global capital markets.

Finance Secretary Luis Caputo enter the building that houses the office of mediator Daniel Pollack about one hour before Pollack arrived, according to a Reuters witness.

As Caputo headed into the talks, Argentine bonds made fresh gains after the government secured a $5 billion bank loan to bolster the central bank’s foreign currency reserves.

“The bondholders will be here and Argentina will be here,” Pollack told reporters on the way into his office to meet with Caputo.

Newly elected President Mauricio Macri told Reuters at the World Economic Forum in Davos on Jan. 22 he wanted a fair agreement “early this year.”

He said the biggest sticking point was the penalties on the defaulted bonds.

The Finance Ministry said on Monday that Argentina would make a formal offer this week.

“The government wants to achieve a haircut on the punitive interests weighing on the debt,” the ministry said.

Investors questioned whether Macri will seal a deal before Argentina’s Congress, which must approve any accord, returns in early March.

The government is hoping to have a deal with the holdouts before Congress reconvenes, said Alejo Costa, chief strategist at Buenos Aires-based investment bank Puente. “I think they’re now starting to have some doubts about whether it’s going to be possible,” he said.

Even so, foreign investors remained optimistic about a deal this year.

The country’s defaulted 2033 U.S. dollar discount bonds rose 2.02 points to 113.14 on Monday, while the 2038 Par bond inched up 0.77 points to 60.95, both respectively reaching two week highs.

Macri’s predecessor, Cristina Fernandez, refused to settle with the funds that spurned debt restructuring following Argentina’s record $100 billion default in 2002. Fernandez called them “vultures.”

“... The country (wants) to settle this as quickly as possible to regain access to international capital markets so that they can start issuing new bonds at reasonable rates,” said Rune Hejrskov, senior portfolio manager at Jyske Invest, which holds Argentine debt.

Alejo Czerwonko, an emerging markets strategist at UBS in New York, expects a deal, or at least real progress, within the next six months.

“If we get to the end of the second quarter and neither party looks willing to meet in the middle then I think the market would begin to worry,” he said. (Additional reporting by Tariro Mzezewa in New York and Sarah Marsh in Buenos Aires)