Argentina, holdouts meet in debt dispute with court appointee

Thu Jul 24, 2014 6:30pm EDT
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By Daniel Bases

NEW YORK (Reuters) - Representatives for holdout investors and Argentina in the country's ongoing debt default met for about three hours with a court-appointed mediator in New York on Thursday, less than a week before Argentina could once again default.

Several members of Argentina's delegation left the Manhattan office of special appointee Daniel Pollack around 3:30 p.m. EDT but declined to comment on the talks. Edward Friedman, a lawyer for Aurelius Capital Management, one of two leading holdouts, emerged shortly after, also without commenting.

Argentina faces its second default in 12 years if it fails to cut a deal with the hedge funds demanding full payment, instead of a reduced amount, for defaulted bonds. In 2002 the country, facing dire economic conditions, defaulted on approximately $100 billion of sovereign debt.

The two sides were ordered by U.S. District Judge Thomas Griesa to meet with Pollack until a resolution is reached. Without a settlement, or Argentina electing to pay the holdout hedge funds a court-ordered $1.33 billion plus accrued interest, Argentina could be in default.

Earlier in the day, Argentina's La Nacion newspaper reported that one of two lead holdouts in the case, NML Capital Ltd, a division of Elliott Management Corp, could call for Griesa to temporarily suspend, or stay, his order that Argentina pay holdout creditors. Argentina says the order is pushing it toward default.

However Mark Brodsky, chairman of Aurelius Capital Management, said in a statement that "the story is utter fiction."

Argentina was ordered to pay the holdouts at the same time it paid bondholders who accepted an exchange, or restructuring, of defaulted debt in 2005 and 2010.

In the wake of La Nacion's story, investors bid Argentine debt prices higher and narrowed the yield spread over benchmark U.S. Treasuries.   Continued...

Argentina's Finance Secretary Pablo Lopez (C) arrives for debt negotiation talks with court-appointed mediator Daniel Pollack in New York, July 24, 2014. REUTERS/Mike Segar