Argentina launches investigation into holdouts' investments

Mon Aug 4, 2014 7:01pm EDT
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By Sarah Marsh and Eliana Raszewski

BUENOS AIRES (Reuters) - Argentina's markets watchdog on Monday launched an investigation into what it believes may have been unlawful speculation by holdout creditors whose litigation against the country for repayment of their defaulted bonds pushed it into a new default last week.

The government also reiterated its fierce criticism of the mediator in debt talks with the holdout hedge funds for being "biased" and a "spokesman of the vulture funds".

Local markets were mixed on Monday as players waited for new signs of how soon Argentina might reach a deal with holdouts in order to exit default. Argentine bonds fell slightly while the Merval .MERV stock index flickered up and down.

The head of Argentina's Securities Commission Alejandro Vanoli said it had asked its U.S. counterpart for information on trade of Argentina's sovereign debt and credit default swaps (CDS), derivatives used to insure against default.

The watchdog wanted to check if holdouts who rejected Argentina's restructuring in the wake of its 2002 default held or traded CDS while they took part in negotiations with Argentina which could trigger a default.

"The use of insider information, which would be the case here, and market manipulation are crimes in Argentina, they are crimes in the United States, and they imply economic sanctions and eventually criminal sanctions," Vanoli told a news conference.

Over nearly the last two years, sources familiar with the position of the holdouts have told Reuters the firms are not holders of CDS positions. A new source said on Monday that this stance has not changed.

"There is absolutely no evidence to demonstrate that the holdouts hold Argentine CDS positions. No proof," said the source, who is familiar with the holdout positions.   Continued...

Alejandro Vanoli, President of Argentina's market regulator Comision Nacional de Valores (CNV), speaks during the Reuters Latin American Investment summit in Buenos Aires May 6, 2010. REUTERS/Enrique Marcarian