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Exclusive: Holdouts not asking to suspend Argentine debt order - Aurelius
July 24, 2014 / 1:56 PM / 3 years ago

Exclusive: Holdouts not asking to suspend Argentine debt order - Aurelius

NEW YORK (Reuters) - Argentine debt holdout investor Mark Brodsky refuted a story in Argentina’s La Nacion newspaper suggesting his group, which is negotiating a settlement with the government, will ask a U.S. judge to suspend his payment order ahead of a July 30 deadline.

Brodsky is the chairman of Aurelius Capital Management, one of the lead holdout investors in the case which awarded them $1.33 billion plus accrued interest. Argentina was ordered to pay the holdouts at the same time it paid bondholders who accepted an exchange, or restructuring, of defaulted debt in 2005 and 2010.

“The story is utter fiction,” Brodsky said in a statement.

La Nacion reported that the other lead holdout in the case, NML Capital Ltd, a division of Elliott Management Corp, could call for U.S. District Judge Thomas Griesa in New York to temporarily suspend, or stay, his order that Argentina pay holdout creditors. Argentina says the order is pushing it toward default.

The two parties are due to meet with the court-appointed mediator Daniel Pollack in New York on Thursday.

In the immediate wake of La Nacion’s story, investors bid Argentine debt prices higher and narrowed the yield spread over benchmark U.S. Treasuries.

Yields on restructured Argentine debt, such as the 2038 Par bonds ARGGLB38=RR traded up 1.068 points in price in mid-morning New York trade, according to Reuters data. The price rose sharply on La Nacion’s story, but then fell back once Brodsky’s statement was reported. The bond is yielding 8.38 percent at a bid price of 52.854.

“Absolutely Brodsky moved the market. The official denial from the holdouts clearly had an impact on market pricing as this is a much more credible source than the rumors reported in the local press,” said Siobhan Morden, head of Latin America strategy at Jefferies in New York.

The benchmark JPMorgan Emerging Markets Bond Index Plus (EMBI+) showed the Argentine yields narrowed by 28 basis points to 628 bps, with total returns up 1.67 percent.

Earlier, Argentina’s Cabinet Chief Jorge Capitanich said the country was not holding negotiations behind the scenes with the holdout investors.

Argentina faces its second default in 12 years if it fails to cut a deal with the hedge funds demanding full payment, instead of a reduced amount, for defaulted bonds. In 2002 the country, facing dire economic conditions, defaulted on approximately $100 billion of sovereign debt.

Argentina, Latin America’s No. 3 economy, argues paying the holdouts would break a legal clause protecting creditors who accepted large writedowns after its 2002 default and open it up to claims worth as much as $15 billion.

Griesa’s injunction which blocks payment has stopped Argentina from transferring a June 30 coupon payment to exchange bondholders. That triggered a 30-day grace period that ends on July 30. Griesa has told both sides to continue negotiating.

Additional reporting by Alejandro Lifschitz and Sarah Marsh in Buenos Aires; Editing by Chizu Nomiyama

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