MercoPress. South Atlantic News Agency

Kicillof blames Judge Griesa for the 'no-deal' situation with holdouts

According to Kicillof, Judge Griesa is allowing 1% of holdouts to block 92.4% of bondholder from collecting their coupons

Argentina failed to strike a deal to avert its second default in more than 12 years after talks with holdout creditors and special mediator Daniel Pollack ended without a settlement on Wednesday.

 Economy minister, Axel Kicillof, speaking at a news conference at the Argentine consulate in New York, repeatedly referred to the holdout hedge funds as “vultures” and blamed Judge Thomas Griesa rulings for the stalled situation, after two days of talks failed to produce an agreement.

Kicillof said Argentina offered the holdouts similar terms as other creditors who negotiated bonds swap in 2005 and 2010, as it attempts to regain the good graces of international capital markets that it has been frozen out of since its 2001 default.

“Those terms were rejected” Kicillof underlined who added Argentina was not defaulting because it made the payments, and a third party, not anticipated in the bonds' contracts impeded holders from collecting their monies.

After defaulting in 2002, Argentina restructured its debt in 2005 and 2010. More than 92% of the bondholders agreed to accept new bonds with reduced payments. The holdouts refused the terms, and were awarded 1.33 billion, plus interest, by US Judge Griesa.

A fresh default is not expected to affect Argentina's economy as it did more than a decade ago, when dozens were killed in street protests and the authorities froze savers' accounts to halt a run on the banks.

There will still be consequences, however, as it is expected to worsen an economy already in recession, weaken the currency as more Argentines seek to hold dollars, and put pressure on foreign reserves. It could also raise soybean prices, as the country is the world's third-largest soybean exporter.

Kicillof said he planned to return to Argentina after the news conference, saying the country will take all measures needed to face what he called an unfair situation.

The minister reiterated the country's position - that it cannot pay the holdout hedge funds without triggering a clause that would cause it to renegotiate with bondholders who accepted restructured debt agreements after the country defaulted in 2002.

The holdout hedge funds want full repayment on bonds they bought on the cheap after the country defaulted, a demand Argentina has so far rejected.

Latin America's No. 3 economy has for years fought NML Capital, a unit of Elliott Management Corp, and Aurelius Capital Management, the leading US hedge funds that rejected large write-downs.

The Buenos Aires government has pushed hard for a stay of the US court ruling that set Wednesday's deadline.

Argentina has until midnight Wednesday (0400 GMT on Thursday) to break the deadlock. Kicillof claimed that Judge Griesa and his 'limited knowledge' of international finance is preventin Argentina from making the July 30 deadline - representing the end of a 30-day grace period - for a coupon payment on exchanged bonds.

Argentina has consistently argued that a so-called rights upon future offers, or RUFO, clause prohibits it from settling with the holdouts. That clause expires at the end of 2014.

Kicillof said Argentina has already made that payment, as it deposited 539 million in the Buenos Aires account of trustee agent Bank of New York Mellon. As of Tuesday, that money was still there, according to a source at the Argentine central bank.

The Argentine official admitted “honestly I don't understand US Justice system in which 1% of holdouts is blocking 92% from collecting their coupon. We offered to pay holdouts, we requested that all bondholders be part of the discussions, but Judge Griesa rejected the idea, and his ruling was supported by an Appeals court and the Supreme Court. Honestly it's hard to understand this ferocious speculative capitalism”.

When during the press conference informed of Special Master Daniel Pollack release on the failed talks and imminent default, Kicillof said he was unaware of the news but anyhow regretted the contents if it talked of 'default'.