Argentina Refusing Talks With Elliott as Default Looms

Less than three weeks before Argentina risks a default, government officials still haven’t met with hedge funds who won a court ruling forbidding the country to make bond interest payments before they get $1.5 billion.

“We have not seen any indication that Argentina is serious about even beginning a negotiation,” NML Capital, one of the holders of bonds from Argentina’s 2001 default that sued for full repayment, said in a statement July 11.

While representatives of NML and Argentine met separately last week with a court-appointed mediator in Manhattan, no direct discussions have taken place almost a month after the U.S. Supreme Court declined to hear Argentina’s appeal in the case. The South American country has until July 30 to make a payment on its performing bonds, which it can’t do before settling with NML, or default for the second time in 13 years.

While an eventual deal with the so-called holdout creditors is likely, “it is hard to imagine this will happen soon,” Federico Thomsen, principal at Buenos Aires-based research company E.F. Thomsen, said in an e-mailed response to questions. “Over the coming weeks, we will probably see markets fluctuate between bouts of optimism and occasional scares as frictions and obstacles become visible.”

Argentina, whose national soccer team lost the World Cup final to Germany yesterday, saw its dollar bonds due 2033 rally last week. Prices touched the highest in three years on speculation the nation is making progress on reaching a deal to resolve the case. NML has said that it would be willing to accept a combination of cash and new bonds to settle the dispute. The yield on the debt rose four basis points to 9.1 percent at 11:45 a.m. in London.

Midtown Meeting

Jay Newman and Lee Grinberg, money managers at Elliott Management Corp., the parent company of NML, were seen leaving mediator Daniel Pollack’s offices in midtown Manhattan on July 11 shortly after Argentine officials. While both sides presented arguments to Pollack, they didn’t do so in each other’s presence, he said in a statement after the meetings.

“No resolution has been reached,” Pollack said. “It is my hope that there will be future dialogue.”

The legal battle stems from Argentina’s record $95 billion default in 2001. The nation restructured about 92 percent of the debt in 2005 and 2010 by imposing discounts of about 70 percent. Creditors including Elliott shunned the debt swaps to seek better terms through litigation.

No Default

The U.S. Supreme Court on June 16 left intact the decision that bars Argentina from paying restructured debt unless holders of defaulted bonds are paid in full. A U.S. judge blocked a $539 million interest payment on June 27.

The country’s negotiations with bondholders will succeed, Mario Blejer, vice president of Banco Hipotecario and a former president of the Argentine central bank, said in an interview with Bloomberg TV today. Beljer said he was “absolutely certain” there will be no technical default.

Argentine officials told the mediator last week that a delay on the orders is necessary for talks. A settlement risks triggering as much as $15 billion in additional claims from other bondholders, Economy Minister Axel Kicillof has said.

“Argentina is open to continuing a dialogue that allows it to reach a solution in fair, equal, and legal conditions for 100 percent of bondholders,” the Economy Ministry said in a statement released after the talks yesterday.

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