A US judge ordered Argentina and investors who did not participate in the country’s past debt restructurings to meet “continuously” with a court-appointed mediator until a settlement is reached, warning of the threat of a new default.
US District Judge Thomas Griesa in New York told Argentina and lawyers for investors who declined to restructure their bonds after the country defaulted on about US$100 billion in 2002 that time was running out to reach a deal and avert a fresh default.
“That is about the worst thing I can envision. I don’t want that to happen,” the judge said.
Jonathan Blackman, a lawyer for Argentina, Latin America’s third-largest economy, said even with around-the-clock talks, it would be “unlikely, if not impossible, to result in settlement.”
“It simply can’t be done by the end of the month,” he said.
Griesa ordered the parties to meet with Daniel Pollack, a New York lawyer appointed to oversee settlement talks, “continuously until a settlement is reached.” Pollack scheduled a meeting for yesterday at 10am.
Pollack, who was appointed on June 23 as a mediator, has been holding meetings with the parties, publicly acknowledging talking twice with Argentine officials.
DELEGATION
Argentina is sending a delegation to meet with Pollack, but a government source said Argentine Economy Minister Axel Kicillof would not be among the group.
The presidency of Argentina said in a statement that: “Judge Griesa ... resolved absolutely nothing on any of the issues which had been brought before him.”
A lead holdout creditor, Elliott Management’s NML Capital Ltd, said in a statement it was prepared to meet with Pollack to resolve the dispute.
“We are confident this matter could be resolved quickly if Argentina would join us in settlement discussions,” NML said.
Argentine over-the-counter dollar-denominated bonds slid following the hearing, before recovering some of the losses. The bid price on the Discount bond was down 1.1 percent on a day earlier at US$86.65 at 5:25pm on Tuesday, while the Par bond was 0.8 percent lower at US$50.80.
“Clearly Argentina is running out of time,” said Ignacio Labaqui, an analyst for consultancy Medley Global Advisors. “Today is the first time I have seen the market believing that Argentina might default. It’s up to Argentina to decide what it will do.”
BRINK OF DEFAULT
Argentina has been pushed to the brink of a fresh debt default by US court decisions that it must pay US$1.33 billion plus interest to bondholders who did not participate in debt swaps in 2005 and 2010. The holdouts are led by NML and Aurelius Capital Management.
The country argues that paying the holdouts would open it up to as much as US$15 billion in claims from other investors and further strain its financial condition.
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