Argentine Economy Minister Kicillof Joins Debt Talks in New York

Argentina’s Economy Minister Axel Kicillof joined a meeting with a court-appointed mediator in New York as the country tries to resolve a dispute with holdout creditors before a bond-default deadline tomorrow.

Kicillof arrived about seven hours after an Argentine delegation led by Finance Secretary Pablo Lopez began meeting with mediator Daniel Pollack. Today’s talks, the fifth with Pollack since a U.S. judge named him to the post in late June, lasted longer than all the previous meetings.

“We all interpreted it as a good sign that the meeting was extended, because clearly they’re working on something,” said Jorge Piedrahita, chief financial officer of Torino Capital LLC.

The country’s stocks rallied today as the meeting extended into the early evening, with Argentina’s benchmark Merval index jumping 6.5 percent after earlier losing as much as 1.1 percent. The index closed at its highest since June 23. Argentine bonds due 2033 rose 1.6 cents to 85.47 cents on the dollar.

U.S. District Court Judge Thomas Griesa blocked the country from making a June 30 debt payment because the country didn’t comply with a court ruling that it pay the holdout creditors at the same time. Those investors, led by Paul Singer’s Elliott Management Corp., refused to accept the terms of the country’s debt restructurings in 2005 and 2010.

If Argentina doesn’t pay the notes tomorrow by the end of a 30-day grace period, it’ll default for the second time since 2001, when it reneged on a record $95 billion of debt. This time Argentina stands to default on $29 billion of foreign currency, issued under international laws.

Sweetening Deal

In the four previous meetings Argentine officials have held with Pollack, they’ve asked holdouts to offer protection against a clause that prohibits the nation from sweetening their deal without making the same offer to investors who accepted the restructured bonds. As an alternative, they urged the court to delay the ruling until that requirement expires at the end of this year.

While Pollack had urged the sides to hold face-to-face talks, the government so far had refused. The last meeting at the mediator’s office lasted just one hour.

Local television channel CN23 reported that the association of local private banks will offer to buy the defaulted bonds from the holdout creditors in an attempt to help Argentina avoid default.

On June 16 the U.S. Supreme Court left intact lower-court orders for Argentina to pay the holdout creditors about $1.5 billion if it makes any payments on restructured debt.

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