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 The country's peso currency hit a record low on fears that the
already years-old debt saga would linger on indefinitely.
Addressing rumors in the marketplace of offers from big
international banks to buy up its position in defaulted debt, one
lead holdout investor said after many meetings nothing presented
made sense for a settlement on bonds dating back to a near $100
billion default in 2002.
"That engagement has convinced us that there is no realistic
prospect of a private solution," Aurelius Capital Management said in
a statement.
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 the defaulted Argentine debt they have owned
and purchased at steep discounts over the last 12 years. The
holdouts spurned two prior restructurings, holding out for better
terms.
"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was withdrawn before we could even respond.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.
Citigroup, Deutsche Bank, HSBCand JP Morgan <JPM.N> offered the
holdout hedge funds 40 cents on the dollar for the roughly $1.66
billion of bonds, including interest, and raised the offer to 50
cents on Monday, sources told Thomson Reuters IFR.
A second default occurred after Argentina missed a July 30 deadline
for coupon payments on bonds restructured in 2005 and 2010. After
the deadline passed, hopes turned toward proposals drawn up first by
Argentina and then by large international banks to work out a
solution.
By clearing up the default with the holdouts from the 2002,
Argentina would be able service its restructured debt.
Argentina claims it cannot pay the holdouts on what would be better
terms than the investors who exchanged their defaulted bonds 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.
U.S. District Court Judge Thomas Griesa, who has presided over the
long-running legal battle, said on Friday he would issue a contempt
order unless Argentina stopped claiming it had met its obligations
and was not in default.
COMES OUT SWINGING
Argentina came out swinging on Wednesday against Griesa, defying the
threatened contempt order.
Far from backing off, Cabinet Chief Jorge Capitanich said Griesa had
not grasped the case's complexities and that no new talks had been
scheduled with the hedge funds.
"The proper conditions do not exist to negotiate," Capitanich told
reporters in Buenos Aires.
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Argentina's peso weakened more than 1.5 percent on Wednesday to a
record low 13.15 per U.S. dollar in unofficial trade <ARSB=>.
Foreign exchange controls force most Argentines to buy dollars on
the black market, which is widely seen as a truer rate of exchange
than the official rate of 8.2750 per greenback.
In 2012, Griesa ordered Argentina to pay the holdout group led by
Aurelius and Elliott $1.33 billion plus interest and barred it from
repaying the holders of exchanged debt without paying the holdouts
too.
In June, Argentina deposited $539 million into the account of an
intermediary bank to make a June 30 coupon payment. Griesa ruled the
deposit illegal and ordered the money frozen.
As a result, Argentina effectively missed the payment. The
International Swaps and Derivatives Association (ISDA) will hold an
auction on Aug. 21 to settle Argentina's default swaps, Thomson
Reuters' IFR reported.
Holders of the restructured bonds have asked Griesa to allow the
intermediary bank to release the money, and Capitanich criticized
the judge for not acting on those requests.
"His lack of decision clearly comes from not understanding the
process, not understanding Argentina's status as a sovereign
country," Capitanich said.
Argentina derides the holdout funds as "vultures" out to wreck the
country's finances in their pursuit of huge profits. Opinion polls
show most Argentines side firmly with the government.
Economy Minister Axel Kicillof on Tuesday posted a drawing on his
Facebook page of a beady-eyed vulture wearing a shirt with the
letters "U.S.A." and emblazoned with the U.S. flag. Next to the
drawing are written the words "greed" and "cruelty". (https://www.facebook.com/pages/Axel-Kicillof/116053261893854)
Over-the-counter sovereign bonds traded in Buenos Aires fell by an
average 1.3 percent on the day.
(Additional reporting by Davide Scigliuzzo of Thomson Reuters IFR in
New York, Daniel Bases in New York, Sarah Marsh and Walter Bianchi
in Buenos Aires; Editing by Jonathan Oatis, Paul Simao, Chizu
Nomiyama, Peter Galloway and Bernard Orr)
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