Judge Orders Two Sides to Negotiate on Argentina Debt

US judge Thomas Griesa of the Federal District Court in Manhattan has ordered Argentina and a group of New York hedge funds to meet with a court-appointed mediator ‘continuously’ so that the two sides can reach agreement over the contentious issue of the country’s debt repayments.

The order comes only days before the 30 July deadline when Argentina is required to make an interest payment on its restructured bonds. The judge has ruled that the country cannot make that payment unless it also pays all it owes to bondholders who declined to take part in its debt restructuring.

The judge urged both sides to find a way to agree on a settlement, as if Argentina fails to make the payment it will enter into a fresh default.“That is about the worst thing that I, sitting here, can envisage,” Judge Griesa said.

“Real people, not vultures, will be hurt.” The Argentine government has taken out a series of advertisements recently in US newspapers denouncing the funds that have resisted its debt restructuring as ‘vultures’.

However, lawyers for Argentina said at a hearing in New York that a settlement with the holdouts to allow it to make interest payments within the next week “was not possible, even with round-the-clock talks”.

Earlier this week, Argentina repeated its court request to put on hold an order to pay the holdouts – a group of hedge funds that refused to participate in the country’s debt restructurings after it defaulted on its bonds in 2001.

While the country eventually reached a deal with investors who agreed to accept a lower amount than they were owed, a group of bondholders including Elliott Management and Aurelius Capital Management rejected the offer. They later sued Argentina, saying it must pay the full amount owed to all the holdouts.

 

Judge Griesa, who is overseeing the long-running debt dispute, rejected the latest request.

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