Argentina, 'vulture funds' still at odds over repayment

Argentina's toughest "holdout" creditors have not accepted its repayment offer despite intense marathon negotiations this week, a US mediator said Friday.

Daniel Pollack, the court-appointed mediator in the negotiations, said that although two of the six main hedge fund creditors had accepted the "landmark" $6.5 billion offer, the other four had yet to accept.

"Intensive discussions between and among high-ranking Argentine government officials, principals of those four firms and me have continued through the week," Pollack said.

"These discussions have gone late into the night and will continue," he said.

But comments from one of the hedge funds, Aurelius Capital Management, suggested the new government in Buenos Aires could get bogged down like its predecessor in legal battles with creditors if branded "vultures."

Aurelius chairman Mark Brodsky accused the country of resorting to litigation rather than accepting what he called a "substantial" discount to his company's repayment claims.

On Thursday Argentina requested a New York court to remove injunctions blocking its debt payments to other creditors now that it has made a strong offer to holdouts.

After years of stalling by his predecessor Cristina Kirchner, last week the new government of President Mauricio Macri offered the holdouts, bondholders who stayed out of the country's huge debt restructurings in the 2000s, $6.5 billion to resolve all of their claims, worth some $9 billion.
Pollack called the offer "an historic breakthrough", and two of the six main holdout claimants immediately accepted the deal, which Buenos Aires said paid about 75 percent of their claims.

But Aurelius and NML Capital and two others have not yet accepted.

The country defaulted on about $100 billion in debt in 2001 and was able to persuade holders of 93 percent of that to accept losses in a restructuring.

But Aurelius and NML -- having scooped up the debt at a huge discount around the time of the default --  have held out for full payment and in 2012 won a court battle. They want about $1.75 billion covering the face value of their bonds and accumulated interest.

In its petition Thursday to the judge in the 2012 case, Thomas Griesa, Argentina argued that its settlement offer shows it is making genuine efforts to strike an agreement.

"Now, however, the continued force of the injunctions makes it difficult for Argentina to access the global capital markets to raise funds to complete the settlements," the petition said.

It said also that the injunctions create "an incentive for the remaining holdout bondholders not to settle on reasonable terms."

Brodsky though blasted the offer, saying that for him, it represents only 70 percent "of a substantially reduced claim –- a double haircut."

"Given the choice between accepting the substantial haircut we have offered, continuing negotiations, and litigating, Argentina chose to litigate. This is a baffling continuation of the failed strategy of the past," he said Friday.