Negotiations Between Argentina and Hedge Funds To Restart In 2015

Negotiations Between Argentina and Hedge Funds To Restart In 2015

Despite the acrimonious words from both sides in the many months of the ongoing Argentinian bond default crisis, it appears that they are still willing to talk. According to an October 13th article in FINalternatives, attorneys for both sides in the Argentina-hedge fund debt dispute are prepared to meet to discuss the initial steps for a resolution to the default crisis next year.

U.S. court-appointed mediator Daniel Pollack is planning meetings with both sides this week to hash out the agenda for negotiations in January. The key timing issue is that the rights upon future offers (RUFO) clause in Argentina’s restructured debt—which prevents it from making a deal with the hedge funds—expires at the end of the year.

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RUFO bars deals with hedge funds

Argentina argues the RUFO clause in its earlier restructured debt prevents it from making a better deal with holdouts from its 2005 and 2010 debt exchanges than the close to 30 cents on the dollar other debtors received. The holdout hedge funds, led by Elliott Management and Aurelius Capital Management, dispute Argentina’s legal arguments and won a judgement in U.S. court that led to Argentina recently defaulting on the bonds yet again.

Recent Argentina default

As noted above, Argentine defaulted on one class of bonds for a second time in July, when it couldn’t come o a deal with the hedge funds. Related to this, a U.S. federal judge has barred Argentina from servicing its restructured debt without paying the holdout hedge funds first.

Of interest, Argentine Economy Minister Axel Kicillof recently claimed that the nation still had access to the international debt market, with more than a half a dozen private investors standing by to provide financing. Kicillof spoke at Argentina’s embassy last week, but also noted that Argentina has not accepted any of the offers to date. He did not identify the the lenders, nor did mention the terms under which the loans were offered.

Kicilloff ended his speech by continuing the war of words. “The problem is not Argentina. It is not us,” he said. “It is the vulture funds.”

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