Argentina Bond Judge Tells Sides to Keep Talking

The U.S. judge overseeing a court battle that led Argentina to default on a $539 million interest payment this week ordered the nation and a group of U.S. hedge funds to keep talking in a bid to resolve the crisis.

U.S. District Judge Thomas Griesa also said today he won’t replace a court-appointed mediator, after a lawyer for Argentina said it “no longer has confidence” in the negotiation process led by McCarter & English LLP partner Daniel Pollack. Any settlement will have to involve all the nation’s creditors, said Argentina’s lawyer, Jonathan Blackman.

“Ultimately, a settlement is the only way to resolve this,” Blackman told Griesa today in a hearing in Manhattan federal court. “It has to be global and it has to involve all the debt.”

A series of rulings by Griesa bar Argentina from paying holders of its restructured debt unless it also pays more than $1.5 billion to a group of hedge funds, led by billionaire Paul Singer’s NML Capital, that hold the country’s defaulted bonds.

In the hearing, Griesa criticized as “highly misleading” Argentine officials’ statements that the country is willing to pay its debts, with the judge saying Argentina is ignoring court rulings won by NML and other creditors. Argentine officials have also said that Griesa and Pollack are biased.

“He is completely impartial,” Griesa said of Pollack. “If he weren’t, I would remove him or I would never have appointed him.”

‘Deep Concern’

Blackman told Griesa that Argentina expressed its “deep concern” about a statement issued by Pollack, after negotiations ended on July 30 and the payment deadline passed without an agreement.

“Unfortunately, no agreement was reached and the Republic of Argentina will imminently be in default,” Pollack said in the July 30 statement.

Blackman told Griesa the statement was “harmful and prejudicial to the republic in its impact on the market.”

“Something had to be said to the public and if the word ’default’ was used, it can hardly be said to be inaccurate,” Griesa responded. He said Pollack has made progress in the talks.

Restructured Bonds

Argentina defaulted on a record $95 billion in debt in 2001. Holders of about 92 percent the debt agreed to exchange their bonds for new ones at a discount of about 70 percent in debt restructurings in 2005 and 2010. Holdouts including NML Capital sued, seeking full payment.

Standard & Poor’s declared Argentina again in default July 30 after the government missed the deadline to pay interest on $13 billion of restructured bonds.

Griesa issued an order today clarifying that his bar on payments to holders of Argentina’s restructured debt doesn’t include peso-denominated bonds issued under Argentine law. He also made clear that Citigroup Inc., Euroclear SA and Clearstream Banking SA may process a one-time payment by Argentina on U.S. dollar-denominated bonds.

Griesa ruled July 28 that Argentina may make the one-time payment, which would otherwise be barred, because those bonds can’t be easily distinguished from bonds issued in an unrelated settlement tied to the Spanish oil company Repsol SA.

The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).

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