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October 23, 2014
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Kicillof: No fear of default as clock runs on negotiations

Finance Secretary Pablo López arrives to talks with mediator Daniel Pollack in New York yesterday.
Gov’t delegation meets with special master Daniel Pollack, returns to Buenos Aires

Speaking to his counterparts at an UNASUR summit in Buenos Aires, Economy Minister Axel Kicillof said yesterday Argentina won’t face “any problems” next Wednesday when the 30-day grace period to pay holdouts ends as the country is facing a “judicial extortion” that seeks to “tear down its debt restructuring process.”

Kicillof’s statements came on the same day the government failed to reach a breakthrough with the US court-appointed mediator Daniel Pollack in its battle with holdout creditors in talks that lasted just an hour, suggesting a settlement to avoid a default next week remains elusive.

The Argentine delegation, which included Finance Secretary Pablo López, the Economy Ministry’s Technical and Legal Secretary Federico Thea and Treasury Attorney Angelina Abboba, was returning to Buenos Aires at press time to seek instructions from the government after the talks in New York, Pollack said. Meanwhile, the Economy Ministry underscored it would continue the dialogue with him over the next few days.

In a short press release issued after the meeting, the Economy Ministry said the “process of dialogue” with Pollack will continue “in the next few days” but without giving much details about the negotiation.

“Argentina reaffirmed its intention to move forward to a solution in fair terms for all the bondholders. In the meeting, the different aspects of the case were discussed and the various alternatives available,” the Economy Ministry said.

Earlier this week, US District Judge Thomas Griesa ordered Argentina and holdout creditors who have rejected its debt restructurings to meet continuously with Pollack to try to reach a deal and avoid the country’s second default in 12 years.

If they fail to reach a deal and holdouts do not ask for a suspension of Griesa’s ruling to pay them back in full on their defaulted bonds, the judge will prevent Argentina from making a July 30 deadline for a payment on its exchanged bonds.

“No resolution of the impasse between the parties has been reached. Consistent with Judge Griesa’s instructions of earlier this week in open Court, I anticipate that there will be further communications with the parties prior to the Default date (July 30),” Pollack said.

The “special master” appointed by Griesa said the holdout hedge funds, who bought notes on the cheap after the country’s 2001 US$100 billion default and spurned the terms of its 2005 and 2010 restructuring deals, were not present at the meeting. However he briefed them by telephone and they reiterated their “availability and willingness to meet with him, and, indeed, with representatives of the Republic, at any time.”

‘Willing to dialogue’

Kicillof told finance officials of member countries of the Union of Southern Nations (UNASUR) that Argentina would negotiate but that any talks must be held under fair terms and conditions. He said that Griesa’s order was “unprecedented and impossible to fulfill” and that the country is facing a “judicial extortion.”

“Argentina will continue fulfilling its obligations even though the funds we sent to pay bondholders were blocked. It’s an extortion for the country and we won’t accept extortion,” Kicillof said at yesterday’s summit. “Negotiations are like a puzzle due to Griesa’s interpretation of the pari passu clause.”

Kicillof said Griesa issued an “unusual, incomprehensible and unenforceable ruling” and said that “nobody wants to celebrate a default.” If an agreement isn’t reached before Wednesday, Kicillof said the country “won’t have any problems,” adding that Argentina “is willing to dialogue to reach a solution but not to accept extortion.”

In a teleconference with Cabinet Chief Jorge Capitanich, President Cristina Fernández de Kirchner highlighted yesterday the industrial development of Chaco and described it as the “opposite of what holdouts propose” since they “didn’t invest in the country and seek to take with them millions of dollars.”

Argentina has previously said it needs more time to reach a deal, in part because it worries that it risks running afoul of the so-called RUFO provision in the restructurings, that bars it from voluntarily offering better terms to investors than those it gave in the restructurings.

More than 90 percent of investors agreed to accept less than one-third the original value of their bonds in those swaps.

The government argues it would open itself up to challenges from creditors amounting to anywhere from US$120 billion to US$400 billion if it broke the RUFO. The clause expires on December 31.

Herald with Reuters, DyN

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