Argentina to enter talks with vulture funds
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Deputy business editor
Wednesday 18 June 2014
Officials acting for Argentinian president Christina Fernandez De Kirchner will enter negotiations with the so-called “vulture funds” demanding payment in full for their Argentinian defaulted debt, potentially ending a standoff that could trigger a default.
Earlier this week, her country lost an appeal at the US Supreme Court against the funds’ demands. Ms De Kirchner described them as “extortion” and declared she would not pay them.
However tonight, at a hearing in a Manhattan federal court, lawyers acting for her country said officials were planning to come to New York next week for talks with the bondholders.
The hearing came after the US Supreme Court refused even to hear Argentina’s appeal against rulings that the country should pay the likes of hedge fund Aurelius, run by a trader known on Wall Street as Mark “The Terminator” Brodsky, 100 cents in the dollar on their debt.
The case is particularly controversial as other private bondholders – most of whom unlike Aurelius were lending to Argentina before its 2001 default – have already accepted a “haircut” on their loans of about 70 per cent. But the vulture funds have relentlessly pursued their case and demanded payment in full.
Robert Cohen, a lawyer for one of the vulture funds, NML Capital, said of the Argentinian offer: “If they want to talk about settlement, they know how to find us,” Bloomberg reported.
News of the more conciliatory approach caused Argentinian bonds to reverse some of their losses rapidly amid hopes a default could be avoided. The Argentinian stock market gained by about one percent.
A major problem with doing a deal with the hedge funds is that Argentina would end up also having to pay the same terms to the vast majority of funds who have accepted haircuts.
Ms De Kirchner told her country in a national television broadcast that she was willing to negotiate but that Argentina simply could not pay, in cash, all the vulture funds’ $1.5bn demands on top of its repayments to those lenders who have accepted reduced repayments.
Debt campaign groups argue that much of Argentina’s debt crisis was started by the military junta and exacerbated by irresponsible lending.
The case famously saw NML obtain an order from Ghana to seize the Argentine navy ship The Libertad in 2012. Ghana held the ship for several months until a UN maritime court ruled against the seizure and ordered Ghana to let the ship go.
Mr Brodsky has said throughout the years-long fight that countries around the world should not be allowed to run up debts irresponsibly and get away with it. Last year he said: “Argentina is the world’s leading exemplar of how a sovereign should not treat its creditors.”
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