Argentina in last ditch talks as default looms
Talks continue after sovereign’s “frank exchange of views” with bondholders in 11th hour meeting over debt
Argentina’s finance minister is to
continue meeting holdout creditors on Wednesday, in a bid to
find a last-minute solution to its debt impasse, according to
Argentine media reports.
Axel Kicillof met representatives of the holdouts
for the first time on Tuesday in the presence of mediator
"These were the first face to face talks between
the parties," Pollack said in a statement after the meeting.
"There was a frank exchange of views and concerns. The issues
that divide the parties remain unresolved."
Argentina needs to reach an agreement with holdout
creditors on Wednesday to avoid defaulting on its restructured
debt. A protracted battle in US courts ended last month when the Supreme Court upheld a lower court’s
decision to prohibit the sovereign from servicing restructured
debt without first dealing with holdout creditors.
Attention turned on Wednesday morning to reports in
local media that Argentine banks would intermediate by buying
some debt in an attempt to mitigate legal risks to the
sovereign. Such a move would be designed to avoid a clause that
forces Argentina to offer any future deal with holdout
creditors to holders of restructured bonds, known as the RUFO
Talk of such a solution has circulated for at least
a week, but the claims grabbed the market’s
attention fully on Wednesday.
"There have been no official details from the
mediator on the context of the discussion but the local press
posits that the Argentina banking association has offered to
post $250m to $300m in funds for an escrow payment (2010 debt
reoffer terms to not violate RUFO) or alternatively has offered
to buy the holdout bonds," Jefferies wrote on Wednesday.
"The participation of the Argentine banks is likely
intended to mitigate the RUFO risk with an exchange in these
liabilities with the government after RUFO expires. It is
curious that in these final hours there has finally been some
debate about how to resolve the RUFO liabilities."
The suggestions raised numerous questions, however,
said Capital Economics: "Although a group of exchange
bondholders have recently stated that they would waive the RUFO
clauses, it is not clear if all of them would. There is a risk
that exchange bondholders would instead file for accelerated
repayment of their bonds should they fall into default."
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