Richard Lough, Eliana Raszewski and Daniel Bases Buenos Aires/ New York
ARGENTINA was in a race against time yesterday to cut a deal by the end of the day with holdout investors suing it or win a reprieve from a US court, as a surge in the country’s bond prices fed optimism that an agreement was possible.
Attorneys for holdout hedge funds awarded $1.33 billion (R14bn) plus interest by a US court arrived for talks at the New York offices of court-appointed mediator Daniel Pollack yesterday morning, with hours to go as Argentina faced its second default in 12 years.
Argentine Economy Minister Axel Kicillof arrived shortly after 11am local time for the talks.
The holdout funds are demanding full repayment on bonds they bought at a discounted rate after the country last defaulted in 2002. The price of the bonds surged 15 percent yesterday to levels not seen in three-and-a-half years, a sign to some investors that a deal was attainable.
“It’s trading like there’s a deal,” said a fund manager who holds Argentina’s restructured debt and requested anonymity. “I don’t have information, but someone knows there’s a deal.”
The country has for years fought NML Capital, a unit of Elliott Management, and Aurelius Capital Management, the leading US hedge funds that rejected large write-downs.
After exhausting legal avenues, it faces default if it cannot reach a last-minute deal.
The Buenos Aires government has pushed hard for a stay of the US court ruling that triggered yesterday’s deadline.
The government had until midnight local time yesterday to break the deadlock.
If it fails, US district judge Thomas Griesa in New York will prevent Argentina from making yesterday’s deadline – representing the end of a 30-day grace period – for a coupon payment on exchanged bonds.
After defaulting in 2002, Argentina restructured its debt in two rounds, in 2005 and 2010. More than 90 percent of bondholders agreed to accept new bonds with reduced payments.
A consortium of Argentine banks was set to offer to buy out the holdout investors’ debt, in an 11th-hour deal aimed at averting a default, a senior banking executive familiar with the offer told Reuters yesterday.
The executive said there had not yet been any discussions with the US hedge funds leading the litigation and that the offer would require them to take a haircut, or reduced payment for the bonds.
“The idea is to sit down with the funds and buy all their debt. We have to negotiate the final amount, the terms and how payment will be made,” the executive told Reuters.
Argentina’s key dollar bond due 2033 jumped yesterday, and its debt insurance costs fell as investors took some cheer from Tuesday’s meeting when the holders of its euro-denominated exchange bonds said a suspension would encourage a settlement.
They also said they would facilitate a deal by waiving the so-called Rufo clause.
The 2033 dollar discount bond yesterday dropped its yield to 8.86 percent, a level not seen since November 2010.