Elliott Management Corp. said Argentina is refusing to negotiate a settlement over defaulted bonds, casting doubt on the country’s ability to avoid another debt debacle after a U.S. court blocked all its note payments until a deal is reached.
“Argentina’s professed willingness to negotiate with its creditors has proven to be just another broken promise,” Jay Newman, a money manager at the hedge fund run by billionaire Paul Singer, said in a statement today. “There are no negotiations underway, there have been no negotiations, and Argentina refuses to commit to negotiations in the future.”
The nation has a 30-day grace period after missing $539 million of debt payments due today in dollars, euros and yen to avoid its second default in 13 years. The U.S. Supreme Court on June 16 left intact a ruling requiring Argentina pay about $1.5 billion to defaulted debt holders as it makes payments on restructured bonds that stemmed from its 2001 default. Argentina last week transferred funds to its bond trustee to pay restructured notes without providing funds for the holdouts, only to have U.S. District Court Judge Thomas Griesa order the payment sent back while the parties negotiate.
The government remains willing to negotiate with Singer under the right conditions, Cabinet Chief Jorge Capitanich told reporters in Buenos Aires today.
“Argentina’s position is the same,” he said. “Argentina maintains it is open to dialogue in order to establish conditions for dialogue that satisfy three demands: that they are equal, fair and legal for 100% of bondholders.”
The price on the government’s dollar-denominated 2033 bonds fell for a third day, losing 0.9 cent to 82.79 cents on the dollar as of 1:46 p.m. in New York. The country’s credit default swaps indicate a 67 percent chance of default within the next five years, according to prices from CMA.
Holders of Argentine bonds denominated in euros asked Griesa to help them recover money from the payment that was blocked, arguing that they should be exempt from the ruling since the money they’re owed wouldn’t enter the U.S. and foreign parties aren’t subject to the U.S. court’s jurisdiction.
The payment would be made to a Bank of New York (Luxembourg) account at central bank of Argentina, then to a Belgian entity in Frankfurt and finally to investors through clearinghouses in Europe, according to court papers.
Argentina took out a full-page advertisement in yesterday’s New York Times saying that Griesa favored the holdout creditors and was trying to push the nation to default.
The ruling “is merely a sophisticated way of of trying to bring us down to our knees before global usurers,” Argentina said. “But he will not achieve his goal for quite a simple reason: The Argentine Republic will meet its obligations, pay off its debts and honor its commitments.”
Economy Minister Axel Kicillof has said the nation complied with its obligations to bondholders when it sent the money to trustee Bank of New York Mellon Corp. to distribute.
Argentina probably knew the payment was going to be blocked, according to Carlos Abadi, the chief executive officer of New York-based investment bank ACGM Inc.
“What is not so obvious is why they would put up such a show and waste precious time,” Abadi said. “It’s going to be incredibly complex to reach a comprehensive deal by July 30th, and this sideshow makes the goal even harder.”
After the Supreme Court’s decision, President Cristina Fernandez de Kirchner’s government had initially said that the country would skirt the ruling by swapping its bonds, which were issued under New York law, into new securities outside of U.S. jurisdiction. Officials later said they’d seek a negotiated settlement with the holdouts.
Abuse of Power
Griesa’s move to block the payment is the first time in history a judge has prevented a country from paying a restructured bondholder, according to the government. The Economy Ministry said in an e-mailed statement that Griesa is abusing his power and acting outside of his jurisdiction as the restructured bonds are not part of the holdouts’ case.
“A judge is trying to impede a debtor from carrying out its obligations and creditors from getting paid,” the ministry said.
If Argentina fails to reach a negotiated agreement with the litigants by July 30 and doesn’t obtain authorization to pay the restructured debt, the government of South America’s second-largest economy has said it may take the case to the International Court of Justice at the Hague to argue that embargoing funds set aside for debt payments is a violation of sovereignty.
Argentina’s next international bond payment is scheduled for Sept. 30 on securities due in 2038.
Carmine Boccuzzi, a lawyer for Argentina, told Griesa at the June 27 hearing that the country still hopes for a negotiated settlement.
“Argentina’s government has chosen to put the country on the brink of default,” Newman said in the statement. “We sincerely hope it reconsiders this dead-end path.”
To contact the reporter on this story: Camila Russo in Buenos Aires at firstname.lastname@example.org