MercoPress. South Atlantic News Agency

Argentina and holdouts again disagree before Pollack; end of September another deadline

Pollack said that parties met again to continue exploring possibilities, but “the issues that divide the parties remain unresolved”

Argentina still has “unresolved” issues preventing a settlement with bondholders suing the country for repayment after not participating in the country's restructurings following its 2002 default, a court-appointed mediator said Friday.

 “Special master” Daniel Pollack, a New York lawyer appointed by U.S. District Judge Thomas Griesa in Manhattan to oversee settlement talks, in a statement said he met Thursday with lawyers for Argentina and the bondholders.

In a brief statement Pollack said that on his request the sides met again to continue exploring possibilities, but “the issues that divide the parties remain unresolved,” he said, adding he would continue in his role at the judge's request.

The bondholders in the litigation include NML Capital Ltd, a unit of billionaire Paul Singer's Elliott Management Corp, and Aurelius Capital Management.

Contrary to other occasions the Thursday meeting which was confirmed on Friday was not made public previously, as happened with the trip of Argentine Finance Secretary Pedro López, who on Thursday was in New York and met with “investors” and then left for China.

Likewise as was advanced on Thursday and contrary to Argentine optimism, some of the bondholders have doubts about the legal viability that the government of Cristina Fernandez is attempting with a bill to change the payment location because they do not wish to be declared in contempt of court by New York Judge Thomas Griesa presiding over the case.

“The great risk remains legality, and the viability of the Argentine proposal; until we don't see a specific legal proposal, we don't know if we are on the right path. Maybe it would be better to wait for January when the RUFO clause drops”, according to the prevailing opinion among creditors.

Next 10 September, Judge Griesa is holding a hearing to listen to Citibank's petition, which was authorized on 'an only occasion' to pay sovereign bond dollars issued under Argentina law, and is now being pressed by the Cristina Fernandez government to comply with further payments. Otherwise it could lose its license to operate in Argentina.

Apparently during Thursday's non official meeting with Pollack, Argentina lawyers insisted that the country is prepared to swap holdout bonds for similar ones and in the same conditions as the rest of restructured holders (93%). The option, said Argentina has been open since last year, but holdouts rejected the option and insisted on full face payment of the 1.6bn dollars.

Besides next week's hearing, Judge Griesa who has been very cautious and patient in the handling of the case, will be facing a new deadline: at the end of the month, when Argentina is scheduled to make another coupon payment to bondholders.

By then Cristina Fernandez expects to have the law changing payment location of bonds approved and in effect which, if applied, would then force Griesa to declare Argentina in contempt of court and would have to consent to holdouts intention of going after the frozen funds in the Bank of New York Mellon, which Argentina deposited to pay bondholders at the end of July but was prevented by the pari passu clause.