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Argentina, US bondholders meet as deadline looms

July 30, 2014

NEW YORK (AP) — Argentina’s economy minister emerged from daylong negotiations aimed at preventing a default Tuesday to say both sides had finally spoken for the first time, a development that raised hopes that a deal might be reached to avert a financial crisis.

Minister Axel Kicillof made the revelation shortly before midnight as he left talks he had joined several hours earlier.

Shortly afterward, court-appointed mediator Daniel A. Pollack issued a statement saying Kicillof had led a delegation that met lawyers for U.S. bondholders trying to collect about $1.5 billion they are owed by Argentina.

He said the two sides met several hours in his office and in his presence.

“These were the first face-to-face talks between the parties. There was a frank exchange of views and concerns. The issues that divide the parties remain unresolved,” he said.

Although Kicillof said the negotiations would resume Wednesday, Pollack mentioned the deadline day with more caution.

“Whether and when the parties will meet tomorrow (July 30) remains to be determined overnight,” he said in the statement issued just before midnight.

Argentina faces a deadline midnight Wednesday when it must either meet its bond obligations or plunge into a default for the second time in 13 years.

A federal judge last week had ordered around-the-clock negotiations, but sporadic talks did not seem to take on a sense of urgency until a team of negotiators from Argentina showed up Tuesday morning.

Kicillof arrived seven hours later to meet with lawyers for U.S. hedge funds that bought Argentina’s bonds on the cheap and are now demanding payment.

U.S. District Judge Thomas P. Griesa had ordered Argentina to pay the U.S. bondholders if the South American nation also pays the other 92 percent of bondholders who swapped their bonds for less valuable ones in the last decade.

Kicillof entry into the talks came after the earlier arrival of Argentina’s Finance Secretary Pablo Lopez, treasury official Javier Pargament and two lawyers who said nothing as they entered Pollack’s building.

Argentina has blamed the judge for the crisis, saying his orders are forcing it into insolvency. Argentina last went into default in 2001.

The judge has twice rejected Argentina’s request to suspend the effect of his orders to give Argentina more time to negotiate a settlement with all bondholders.

President Cristina Fernandez has long refused to negotiate with the U.S. hedge funds, led by New York billionaire Paul Singer’s NML Capital Ltd., which spent more than a decade litigating for payment in full rather than agreeing to provide Argentina with debt relief.

Argentina has labeled the U.S. funds “vultures” for picking up bonds on the cheap. The government has said paying the U.S. funds would likely trigger lawsuits from other bondholders demanding payment on similar terms. Argentina says that would cost more than $20 billion.

Late Tuesday, lawyers for a group of London-based bondholders who exchanged their bonds in the last decade said the financial firms that hold the bonds might be willing to drop a clause in their contracts that allows them to match deals reached with other bondholders.

The lawyers said the stance by the bondholders was a “clear signal that the republic may be able to obtain a waiver ... opening up a path to settlement.”

At a court hearing last week, attorney Jonathan Blackman told the judge that the clause was a “huge issue” that made a settlement by the end of the month impossible without some easement of his orders.

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