Argentina Bond Holdouts to Form Group as Debt Talks Begin

Argentine defaulted bond holders are forming a creditors group to negotiate an accord with the government after a separate set of holdouts won a U.S. court order for pull repayment.

Bingham McCutchen LLP is hosting a conference call today for investors who didn’t tender securities in Argentina’s debt restructurings in 2005 and 2010, according to a letter obtained by Bloomberg News. Government officials arrived in New York to begin separate discussions with a mediator about settling with the holdouts that won a $1.5 billion judgment.

The delegation, led by Economy Minister Axel Kicillof, is seeking a solution to a ruling that forces the country to pay holdouts led by Elliott Management Corp. in full when it makes payments on its restructured debt. U.S. District Judge Thomas Griesa on June 27 blocked trustee Bank of New York Mellon Corp. from transferring $539 million to holders of restructured bonds until the plaintiffs are paid . Dollar-denominated restructured bonds due 2033 fell 0.49 cent on the dollar to 86.31 cents at 2:28 p.m. in New York.

Kicillof arrived to the meeting on Park Avenue in a black sport-utility vehicle with a delegation of government officials including Finance Secretary Pablo Lopez. The minister declined to comment to reporters gathered outside when he entered the building.

The call with Bingham McCutchen, scheduled for 2 p.m., was intended for investors who haven’t obtained a court judgment on their securities, according to the letter. Kicillof has said that paying Elliott will give rise to $15 billion in additional claims from other holdouts.

Argentine Settlement

“Given Argentina’s openly stated desire to resolve 100 percent of its debt, we predict the most valuable holdout organization will be one that credibly includes representation of as broad a base of bonds as possible,” Bingham McCutchen’s letter said.

There are still about $6.6 billion of bonds from the default that weren’t swapped in the restructurings, according to data from the Economy Ministry. Dollar-denominated defaulted bonds rallied to about 104 cents on the dollar today, a record, according to New York-based brokerage Seaport Group LLC.

Argentina won’t negotiate with holdouts unless the court indefinitely suspends the orders, Jay Newman, a money manager at Elliott, said today in an opinion piece published in the Financial Times.

Bonds, Cash

“Our firm could be persuaded to give Argentina more time if its government took concrete and serious steps towards meeting its legal obligations,” he wrote.

Elliott would be willing to accept part of any settlement in bonds and other financial instruments, Newman wrote.

In today’s meeting with mediator Daniel Pollack, Argentina will seek court protection from violating the Rights Upon Future Offers clause in the restructured bond contracts that obliges it to match any improved offer it makes on defaulted debt before Dec. 31, Ambito Financiero reported.

Argentina wants Griesa to issue a new ruling stating that payment to holdouts is involuntary to release the country from claims on the RUFO clause, which the government says would bring total claims to as much as $120 billion, a number it says it can’t pay, according to Ambito.

President Cristina Fernandez de Kirchner’s government said today in a legal notice published in the country’s newspapers that BNY Mellon is violating its contract as trustee by withholding the bond payment, which was due June 30. Griesa is exceeding his jurisdiction by blocking funds to holders of euro-denominated restructured bonds that were issued under U.K. law, the government said.

Extra Yield

Argentina has met its obligations to holders of England and Wales law bonds restructured in 2005 and 2010 and “removes itself from any responsibility or incompletion that any ruling or the conduct of the trustee (Bank of New York Mellon) may try to impose on Argentina,” the government said in the notice.

Last week, holders of Argentina’s euro-denominated bonds asked a U.S. judge for an emergency ruling to help them recover money from the blocked payment. Euro-denominated bonds due 2033 gained 0.5 cent on the dollar.

The extra yield investors demand to hold Argentine debt over U.S. Treasuries rose 0.12 percentage point to 6.85 percentage points, according to JPMorgan Chase & Co.’s EMBIG Diversified index.

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