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November 23, 2014
Tuesday, August 5, 2014

‘Bank agreement can’t be ruled out’

Posters criticizing ‘vulture funds’ have been put up in downtown buildings in the past few weeks.
By Fermín Koop
Herald Staff

Financial adviser José María Barrionuevo speaks to the Herald

No light at the end of the tunnel can be seen yet in the government’s long-term legal battle with holdouts, as negotiations are set to continue with “special master” Daniel Pollack and international banks continue showing interest in buying all or part of the debt to avoid losses on their clients’ bonds.

In an interview with the Herald, financial adviser who took part in the the framework for Argentina’s 2005 debt swap José Maria Barrionuevo said the government’s stance in the case is the right one and didn’t rule out a deal with the holdouts yet. Barrionuevo questioned Griesa’s ruling and warned over the effect it could have on other debt restructuring processes while criticizing Pollack’s performance as a mediator.

Do you agree with Argentina’s stance in the holdouts case?

Yes, I think the country’s stance is the right one since it’s willing to make the payments on its restructured debt and has pledged to repay 100 percent of its creditors. Argentina said it’s willing to pay ‘vulture funds’ the same amount it paid previously to those who entered the 2005 and 2010 debt swaps, a stance which matches the country’s sustainability criteria. As the days go by, Argentina’s stance will be even more acknowledged.

Griesa told the government and the holdouts to continue negotiating and to try to reach a deal. Is that still possible?

It’s possible and Argentina has shown willingness to negotiate, something which wasn’t reciprocated by the ‘vulture funds.’ Griesa has to be more clear on what he means by negotiating. Holdouts only want to negotiate on how and when to be paid while the government wants to discuss the whole issue. Argentina is willing to negotiate but the ‘vulture funds’ are not.

The government harshly criticized Griesa as partial to the holdouts. How do you evaluate his performance?

He put a lot of emphasis on the behaviour of the parties and even though that’s an important issue, he should also focus on the precedent he is setting. His ruling is in favour of the ‘vulture funds’ but he left a door open to negotiate. Nevertheless, it’s hard to negotiate if it’s not clear what can be negotiated. Griesa’s ruling is very critical for the United States judiciary, which relies a lot on precedents. Argentina’s stance will finally prevail since it’s trying to protect the interests of its citizens.

Do you think he could issue more clarifications of his ruling, as he did yesterday?

Yes, some aspects need to be clarified in due time.

At the same time, ‘special master’ Daniel Pollack was also questioned by several government officials for being partial to the holdouts, based on his last press release. Do you agree with that?

It’s unbelievable that a mediator who is supposed to find a balance between the two parties expresses support for one of them. He needs to be balanced and act impartially as long as he is the mediator. Anything he says in public has to be previously told to both the parties. Kicillof found out things he didn’t know in Pollack’s statement and that shouldn’t happen.

How do you evaluate Griesa’s ruling? Can it affect other debt restructuring processes?

Griesa said his ruling didn’t set a precedent and didn’t apply to other countries. Nevertheless, it will probably have a negative effect on countries which need to solve their crises. Argentina was the first country to restructure its debt based on a sustainability criterion, which ensures that the country can grow in order to pay. That’s why the country has gained so much support from other countries. There are now about 12 extremely poor countries in a serious crisis.

An agreement between the holdouts and some international banks is reported to be close. Could that be the solution to the case?

It can’t be ruled out. This situation affects many banks and companies from the private sector. They need to reach an agreement between them to share the cost of buying the debt. The government won’t intervene in the negotiation and will continue looking for ways to solve this situation.

Do you see it being possible that the holdouts could move forward with an acceleration?

There are still other issues to be solved before that. Argentina will keep looking for a solution favourable to the interests of all Argentines. There are many options the government is currently considering to do that.

@ferminkoop

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