Argentine Creditors Seek to Waive Clause That’s Hindering Talks

A group of creditors holding about 7 billion euros ($9.3 billion) of Argentine debt is seeking to waive a clause in their securities that’s stalling talks between the nation and holders of its defaulted bonds from 2001.

Christopher Clark, an attorney for the group, said he held a call this morning for creditors interested in resolving the dispute, which triggered a default last week on Argentina’s restructured securities from 2005 and 2010. The group holds about 40 percent of the $23 billion of notes with a clause prohibiting Argentina from offering holdouts a better deal than the one extended in the restructurings, according to Clark.

Economy Minister Axel Kicillof said last week that talks with the holdouts led by Elliott Management Corp., who won a court order for full repayment, failed because the so-called rights upon future offers clause bars the nation from paying them without also improving terms for the exchange bondholders, who accepted losses of about 70 percent. Violating the clause may trigger claims of more than $120 billion, he said.

“We’re trying to organize productive solutions to the issues we see or we read about that are in the way of a settlement,” Clark, an attorney at Latham & Watkins LLP, said by phone from New York. The group is planning “a bondholder-initiated consent solicitation to waive the RUFO clause. We’re seeking other interested bondholders to join us.”

The group will hire an information agent to help acquire the identities of the remaining bondholders, he said. Changing the terms of the restructured notes to eliminate the RUFO clause would require approval by owners of at least 85 percent of all affected bonds, or about $19 billion, he said. The group plans to launch a consent solicitation in coming weeks, he said.

A U.S. judge said Argentina can’t make payments on the restructured securities until it pays the holdout creditors $1.5 billion. The ruling blocked a $539 million coupon payment the nation tried to make in June, and the grace period on those notes expired last week.

Kicillof told reporters in New York last week that he would be open to proposals from creditors to waive the RUFO clause.

Before it's here, it's on the Bloomberg Terminal.