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Argentina's Paris Club and Repsol debt deals possible accord path, hint holdout funds

Tuesday, July 1st 2014 - 23:57 UTC
Full article 6 comments
Structure agreements with Repsol and the Paris Club are “very good models for how we could see a deal for unpaid bondholders” said Jay Newman Structure agreements with Repsol and the Paris Club are “very good models for how we could see a deal for unpaid bondholders” said Jay Newman
“It’s important not to interfere with the actions of the (US) Judiciary” said Margarita Riva-Geoghegan, US Counselor at OAS “It’s important not to interfere with the actions of the (US) Judiciary” said Margarita Riva-Geoghegan, US Counselor at OAS

One of the holdout hedge funds involved in the lawsuit against the Argentine government over pending debt from the 2001 bonds default, pointed out on Tuesday that the agreements struck by Argentina with Spanish oil and conglomerate Repsol and the Paris Club are good examples for the basis of an eventual understanding.

 “The structures of the agreements with Repsol and the Paris Club are very good models for how we could see a deal for unpaid bondholders,” Jay Newman, accounts chief at Elliot Management, told CNBC.

The US court system has ordered Argentina to pay 1.33 billion dollars plus accrued interests to the holdouts, led by Elliott and Aurelius Capital Management.

“In the Paris Club case, and this is very important and telling, Argentina, after more or less the same time as we have been dealing with our demands, recognized the Paris Club's total demand - principal, interest and penalties - and agreed to pay a part in cash and the majority in bonds,” Newman added.

Even when Argentina has publicly stated its willingness to comply with “100% of the country's creditors”, it has consistently refused to pay holdouts the 100% value of bonds arguing it would be unfair with the 93% of restructured bonds' holders plus the fact that a RUFO clause (standing until the end of 2014) could open the whole package and force Argentina into another default.

In effect on Monday for the first time Newman, said the holdout creditors had not been able to meet with the Argentine government to negotiate a settlement on defaulted debt, and accused Argentina of refusing to enter talks, despite clear instructions to that effect from Judge Thomas Griesa who has the case.

“Argentina’s professed willingness to negotiate with its creditors has proven to be just another broken promise,” Newman said. It was the first time the fund had voiced its opinion since the US Supreme Court’s decision to reject Argentina’s appeal against a lower court order for it to pay both restructured holders and holdouts simultaneously or else face having the country’s funds embargoed.

Although the White House at some moment seemed to side with Argentina regarding the sovereignty clause protecting foreign assets, it had never said a further word on the dispute until Monday, when a low ranking official was involved in the debate at the OAS.

“It’s important not to interfere with the actions of the (US) Judiciary,” said Margarita Riva-Geoghegan, Counselor (alternate representative) of the US at the Organization of American States, during a meeting by the international organization to approve a special hearing to debate “sovereign debt restructuring” and specifically “the case of Argentina and its systemic consequences.”

Argentina is trying to pump international political support from such groups as OAS; Mercosur, Unasur, Celac, G77 plus China, to put pressure on Judge Griesa and eventually the US government regarding full payment to holdouts. Argentina has said it is willing to pay under similar conditions to the restructured bonds, but so far had not accepted meeting the mediator named by Griesa, financial expert Daniel Pollack and hedge funds representatives.

This changed last Monday when the Argentine government announced it had named a delegation that would be meeting on Monday 7 July with the counterpart and “special master” Pollack in New York.

Last Friday Judge Griesa called on both sides of the case and asked why negotiations had not started and implicitly said that the 'status quo' would remain until July 30, when Argentina must comply with its June 30 deferred payment to restructured bonds protected by a grace period.

In other words the magistrate would not execute the order which under his ruling means holdouts in litigation must also be paid under pari passu' conditions.

Meanwhile from Germany the Ministry of Finance said it trusts Argentina will honor punctually its debts despite the instability generated by the recent rulings of US Justice which orders the country to pay 1.3bn dollars to several funds.

“We expect Argentina to honor its obligations with Germany as has been agreed” said Finance minister Wolfgang Schaüble quoted by the weekly Der Spiegel. According to the weekly Argentina's debts with Germany amount to 2.6bn Euros

Top Comments

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  • Anglotino

    I didn't think that Argentina would default. However I am starting to reassess that position now.

    Jul 02nd, 2014 - 01:37 am 0
  • HansNiesund


    It's the Falklands playbook all over again: loudly clamouring for negotiations which they then make impossible, appeals for validation to every irrelevant international gathering there is, histrionic posturing and repeatedly insulting their adversary. My guess is they are going to default, and they've intended to do so all along, they're just maneuvering to have a heroic victim card to play, largely for the benefit of the domestic audience.

    Jul 02nd, 2014 - 07:37 am 0
  • Enrique Massot

    Are Argentina representatives expected to be hard negotiators on behalf of the country?
    Absolutely! That is what Argentines expect--for a change.
    In the past, Argentines heard from the generals, from Carlos Menem and Fernando de la Rua about good arrangements reached with creditors. Then the foreign debt ballooned, ending up in the catastrophic default of 2001.
    The Singer-Griesa tandem should realize this time they have a tough bone to chew.

    Jul 02nd, 2014 - 03:23 pm 0
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