MercoPress. South Atlantic News Agency

Argentine bondholders meet to plan recovery of losses

Representatives of investors with more than $30bn (?23.6bn, £16bn) in defaulted Argentine bonds will meet on Tuesday in New York to work towards a joint plan for recovering their losses.

The meeting of the Global Committee of Argentina Bondholders (GCAB) - an organisation formed last month that brings together international retail and institutional investors - takes place as relations with the Argentine government become increasingly acrimonious.

Argentine authorities have attempted to discredit the group since its formation, arguing that some of its representatives lack formal negotiating power and suggesting that it did not have an address or telephone number.

The government is sending Federico Molina, Argentina's financial representative in Washington, to Tuesday's meeting. However, it has pointed out that he will go exclusively as an observer, and will not have any negotiating authority.

On the weekend, Hans Humes, one of GCAB's two chairmen, defended the group's legitimacy and suggested the government was simply trying to minimise the amount it would ultimately have to pay creditors.

"We are the only act in town," he told the FT. "The Argentines seem not to want to have any formal organisation of representatives of these bondholders because I think they probably feel they can get a better deal by giving a take-it-or-leave-it offer."

GCAB recently sent a document to the board of the International Monetary Fund to try to gain formal recognition from the financial institution and place pressure on the Argentine authorities to enter into formal negotiations.

Mr Humes, together with other representatives, have rejected the government's initial proposal, made in September last year, to write off 75 per cent of the nominal value of the debt - an offer they say is equivalent to a 92 per cent write-off in net-present-value terms.

Yet President Néstor Kirchner has refused to soften his position, and on Friday he quashed rumours that Argentina was planning to include more than $18bn of past due interest in the forthcoming restructuring.

"The proposal has not changed at all," he said.

Mr Kirchner says Argentina must first alleviate the abject poverty the financial chaos of December 2001 reaped on large swathes of the population.

Recently, Mr Lavagna invited investors to visit the country's slums to experience that poverty first hand.

That provoked the wrath of Nicola Stock, GCAB's other chairman and representative of Task Force Argentina, which groups together many of about 450,000 retail investors in Italy. "We are not the Red Cross," he said.

At the heart of these arguments is how much Argentina can afford to pay. The government insists that increasing this year's primary fiscal surplus - surplus before interest payments - would jeopardise the country's recent return to growth.

Yet with several consecutive months of record tax receipts - recent estimates suggest January will be the best month in history - investors and their representatives argue that has plenty of money to improve its offer.

Source: Financial Times