November 24, 2014
US optimistic on ‘vultures’
US Chargé d’Affaires to Argentina Kevin Sullivan expressed optimism last night that Argentina’s long-term legal battle with holdout hedge funds would be resolved, predicting that both sides will “reach a solution” in negotiations, which are scheduled to begin next Monday. Sullivan also highlighted the role of Daniel Pollack, the “special master” named to lead the negotiations.“We hope Argentina achieves a definitive solution with its creditors that didn’t participate in the debt swap. It’s a challenge and isn’t easy but I’m positive that both sides will reach a solution,” Sullivan said last night at the embassy’s July 4 celebrations. “There’s willingness to negotiate.”
Sullivan says that the US knows Argentina is “working to insert itself into international markets,” adding that “Pollack’s appointment opens a path to solutions and that’s the important thing.”
Following the country’s failed attempt to transfer the funds to pay its bondholders on June 30, the Bank of New York Mellon asked US District Court Judge Thomas Griesa yesterday to clarify his previous order to return the money since it still holds the US$539 million sent by the federal government and fears “litigation risks” if it complies with the magistrate’s ruling.
“The trustee has significant concerns regarding the plaintiff’s order to return the funds to Argentina. Ordering the trustee to do that could expose the trustee to litigation risk particularly outside of the United States,” Eric Schaffer, a lawyer for the bank, said in a letter to Griesa. Argentina tried to make a coupon payment on its restructured debt due on Monday but payout was blocked by Griesa, who says the government must settle with the holdouts before any more payments can be made on restructured bonds.
Trip to Washington
As part of the country’s effort to muster international support for its battle with holdouts, Economy Minister Axel Kicillof and Foreign Minister Héctor Timerman will speak today in Washington at the Organization of American States to express the government’s stance on the case. For their part, the hedge funds have asked Kicillof to meet today “without preconditions” instead of waiting another week to start negotiating.
“We’re ready to meet with Minister Kicillof during his visit to Washington, DC this week, and to negotiate without preconditions. We’re serious about negotiations, but we’re still waiting for Argentina to engage in a dialogue with us,” Jay Newman, senior portfolio manager at Elliott Management, said yesterday
“We’re glad to see the press reports that Argentina has agreed to meet with the special master next week in New York. But engagement with the court or with creditors doesn’t have to wait another week,” he said.
Hours after the statement, Argentina’s Embassy in Washington rejected Newman’s offer, saying that “vulture fund Elliot seems to disregard the mediator appointed by the judge,” referring to Pollack.
Another holdout joined in with Elliott to call for quicker talks.
“This will be Kicillof’s second speech in the United States in two weeks but both times he refused to speak with us,” Mark Brodsky, head of Aurelius Capital Management, said yesterday.
Cabinet Chief Jorge Capitanich said yesterday the government will press a US judge to unfreeze a coupon payment to holders of the country’s restructured debt as a condition for negotiating with holdout creditors suing for full repayment. Capitanich also said Argentina will stress the need to respect its two restructuring campaigns as a basis for a deal with the holdouts.
“These conditions will naturally include our objective of respecting the restructuring of 92.4 percent of our debt and generating fair conditions for all creditors,” Cabinet Chief Jorge Capitanich said yesterday in his usual morning conference. “We are going into the meeting with this objective.”
Argentina has until the end of the month to strike a deal. If it fails, the country risks tumbling into its second sovereign debt crisis in 12 years. This would sap already-thin central bank reserves and prolong Argentina’s banishment from the global bond market just as the country needs foreign financing to rebuild its grain export infrastructure and develop its nascent shale oil and gas sector.
Timerman explained yesterday that he will be going to the OAS with Kicillof to “ask for support to be allowed to pay and that’s a contradiction. The fact that a country has to come to explain that it wants to pay but can’t shows there’s a failure in the system.”
The meeting is scheduled to begin at 4pm.
Herald staff with Reuters