- POSTED: 24 Jun 2014 03:13
A US federal judge on Monday appointed a Manhattan attorney to supervise talks between Argentina and hedge fund bondholders as Buenos Aires seeks to avoid defaulting on its debt in a week's time.
NEW YORK: A US federal judge on Monday appointed a Manhattan attorney to supervise talks between Argentina and hedge fund bondholders as Buenos Aires seeks to avoid defaulting on its debt in a week's time.
The government of Argentine President Cristina Kirchner had said its legal team would ask US District Court Judge Thomas Griesa to organise negotiations with its creditors, as a June 30 deadline looms for Buenos Aires to pay back billions of dollars.
Argentina has insisted it cannot make the payment -- forced by a US Supreme Court decision last week -- and warned it could be forced into defaulting on all its debt for the second time in 13 years.
On Monday, Griesa named Daniel Pollack as "special master to conduct and preside over settlement negotiations" in the case, which pits Argentina against "holdout" hedge funds who refused to take part in a restructuring of the debt on which Buenos Aires defaulted in 2001.
Pollack is an attorney with the McCarter & English law firm, and specialises in financial litigation.
Griesa's order says that Pollack may conduct talks in public or in private, and that both parties are to offer him their "full cooperation."
Last week, Argentina lost a Supreme Court challenge to a 2012 ruling by Griesa, meaning the country must pay the hedge funds -- "holdouts" from its 2005 and 2010 debt restructuring -- the full value of their bonds as soon as it makes its next regular debt payment, scheduled for the end of this month.
While the two key investment companies which sued Argentina, NML Capital and Aurelius Management, hold about $1.3 billion worth of bonds, Argentina says total payments to holdouts could top more than $15 billion -- more than half of the country's foreign exchange reserves.
If it is required to pay all of that on June 30, Argentina could be forced into defaulting on all its debt, the government says.
"In this context, we are seeking conditions for negotiation that are just and equitable for 100 per cent of the bondholders," Kirchner's cabinet chief Jorge Capitanich said.
Economy Minister Axel Kicillof had asked for a stay in implementing Griesa's ruling.
On Sunday, Buenos Aires took its battle against the hedge fund bondholders, which Argentina brands "vultures", to the US media, placing full-page advertisements in major newspapers demanding US courts help foster "fair and balanced" negotiations.
"Paying the vulture funds is a path leading to default," it said.
For two weeks, Buenos Aires has alternately threatened to default on its debt, to negotiate a solution, or to move the legal jurisdiction over its performing, restructured debt from the United States to Argentina, in order to make it possible to service that debt without paying the holdouts.
But Griesa has made clear his decision means the country cannot pay one group without paying the other, and that an attempt to relocate the restructured debt to Argentine jurisdiction is prohibited under his 2012 ruling.
And he has threatened banks and financial clearing houses with charges if they take part in any Argentine effort to avoid paying either set of creditors.
The issue dates to Argentina's default on nearly $100 billion of debt in 2001. More than 90 per cent of bondholders agreed to take large write-downs on the bonds' value to help the government rebuild its finances.
But holdouts, including many like NML and Aurelius which bought the debt on the market for pennies on the dollar as the country fell into default, have fought in US courts to be paid back 100 per cent, which would bring them huge profits on their investments.
Argentina says that is unfair to the other bondholders and violates the principles that underpin sovereign debt restructuring.
Also on Monday, the "American Task Force Argentina", a private group lobbies on behalf of the hedge funds, downplayed claims that enforcing the ruling would necessarily bankrupt Argentina.
"There is no court order to pay $15 billion," said AFTA chairman Robert Shapiro. "It's a number invented by the Argentine government, and which it appears to be using as an excuse to not pay its creditors."
He said they only need -- for the moment -- to pay the $1.3 billion owed NML and Aurelius, and referred to reports of possible deals with banks that could spread that figure over a longer period.