MercoPress. South Atlantic News Agency

Argentine private banks discussing bond purchase from holdouts

Banker Palla was a member of ex-Minister Lavagna team that negotiated the restructuring of Argentine sovereign debt

The meeting between Argentine private bank representatives and the 'holdouts' over the debt held by the hedge funds has been adjourned and will be resumed on Thursday, according to Buenos Aires financial daily Ambito.com.

 The same source said that Argentine private banks will contribute around 1.4 billion dollars in order to buy the titles from the holdouts investors, which means that Argentina will finally avoid falling into default for any substantial period of time.

Banks offered to pay 250 million dollars upfront and the rest in several payments. Hedge funds appear to have accepted the initiative, but requested the money to be paid fully at once.

Banco Macro director Sebastian Palla and other representatives of Argentine banks have made contact with the funds in New York in order to lay out a proposal to avoid default. The negotiation, which started around Wednesday midday was separate to talks held between Economy minister Axel Kicillof and mediator Daniel Pollack.

Palla, who was a part of former Economy minister Roberto Lavagna's team and who designed the first debt swap in 2005, will try to close the deal first proposed on Tuesday evening by banking organization ADEBA. Other banking executives already in New York on other business have also joined the meeting.

Argentine private banks have offered to buy in pesos Argentine bonds denominated in dollars, which would then be handed over to the holdouts currently demanding full payment of titles defaulted in 2001. In exchange, the financial entities would receive the defaulted bonds, and therefore the litigation currently presided over by judge Thomas Griesa.

This would be carried out without government participation, which means the RUFO clause that expires on December 31 and prevents a better offer being made to holdouts than to bondholders that restructured in 2005 and 2010 would not be triggered.

According to bankers close to the deal, the figure would be worth around 1.6 billion dollars.

Meanwhile New York futures stocks in Argentine petroleum company YPF dropped 3.6% on Wednesday during Economy minister Axel Kicillof's press conference as he announced that there was no agreement with holdout investors in order to avoid default.

Kicillof's speech, given following talks with mediator Daniel Pollack and holdouts' representatives which ultimately failed to bear fruits, occurred after the close of markets in the US city.

The minister had reiterated that “Argentina is willing and it will remain willing as always to talk,” and that the objective of negotiations was to reach a “fair, equitable and legal solution for 100 percent of our creditors.”

Likewise from New York rating agency Standard & Poor's officially downgraded Argentina's sovereign debt grade to the category of selective default.

Ahead of the announcement that talks had ended without progress, S&P revised the rating from CCC- due to the fact that, even if an agreement had been reached between the country and holdout investors, the deal would come too late to turn payment over to those creditors who entered restructuring efforts before the deadline that expired Wednesday evening.