Argentina Nears $5 Billion Accord With Major Bond Holdouts

  • U.S. appeals court agrees to dismiss Argentina bond appeal
  • Nation moves step closer to returning to credit markets

Argentina is near a $5 billion bond settlement with the major holdout hedge funds led by Paul Singer’s Elliott Management, the funds’ lawyer told a panel of appellate judges as the nation takes another step toward reentering international credit markets after 15 years.

“We’re this close to a deal,” attorney Matthew McGill told the judges Wednesday at a hearing in Manhattan. “We are so close.”

The disclosure was made ahead of the appeals court’s ruling that it would let the country drop its challenge to lower-court injunctions that bar it from making payments on its restructured debt.

U.S. District Judge Thomas Griesa said Friday the injunctions will automatically be canceled if Argentina repeals laws barring a settlement and pays any investors who settle by Feb. 29. But the appeals court ordered the judge to consider arguments from investors before formally dropping the injunctions.

The appeals ruling will give bondholders a chance to air their complaints and seek to appeal Griesa’s ruling, which McGill on Wednesday called “deeply, deeply flawed,” a “judicial ultimatum” and a “cram-down.” McGill told the panel he fears Griesa’s ruling may derail a settlement.

“It is so close and it would be such a tragedy if it vaporizes” because of Griesa’s “hasty” ruling, he said.

$5 Billion Deal

McGill told the judges that the parties had agreed on “economic terms” but that additional provisions remain to be worked out before a settlement can be signed. He later referred to the settlement as “a $5 billion transaction.”

The country’s benchmark bonds due 2033 dropped 0.32 cent to 118.7 cents on the dollar at 2:56 p.m. in New York. The securities had rallied since a first-round presidential vote in October on speculation that candidate Mauricio Macri, Argentina’s new president, would take office and reach a deal to end the legal battle.

An official in Argentina’s Finance Ministry said any deal with the holdout creditors would be announced by mediator Daniel Pollack.

Pollack criticized McGill’s disclosure.

Violated Confidentiality

“That statement violated the confidentiality of the discussions between the parties, which is an inviolable principle of all negotiations through me as special master,” Pollack said in a statement. “If and when there is a signed agreement in principle reached between those or any other parties, I will announce it as special master.”

McGill said he represents Elliott, Aurelius Capital Management and two other funds that together hold 65 percent of the bond claims that Griesa has ruled are entitled to equal treatment with the nation’s restructured bondholders.

The appeals were filed by the administration of Cristina Fernandez de Kirchner, Argentina’s former president, who left office in December. Macri, the new president, has made settling with creditors and accessing credit a priority.

Argentina has reached almost $2 billion in agreements with other bondholders, Michael Paskin, the lawyer representing the country in the hearing, said. Paskin said if there are challenges to Griesa’s ruling, Argentina wants them resolved "as quickly as possible."

The case is Aurelius Opportunities Fund v. Republic of Argentina, 15-01060, Second U.S. Circuit Court of Appeals (Manhattan).

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