Hopes fade of Argentina restarting debt talks

Wednesday 13 August 2014 16.22
President Cristina Fernandez branded the hold-outs "vultures," out to wreck her country's finances in their pursuit of profits
President Cristina Fernandez branded the hold-outs "vultures," out to wreck her country's finances in their pursuit of profits

Argentina has hit back at the US judge overseeing its debt default case and disappointed market hopes it might soon restart talks with the hedge funds suing the country.
  
A group of holdout investors have sued the South American country for full repayment on bonds that went into default in 2002.

The funds rejected debt restructurings in 2005 and 2010, holding out for better terms.

US Judge Thomas Griesa, overseeing Argentina's long-running battle with the funds, said in New York last week that he would issue a contempt order unless the government stopped claiming it had met its obligations and was not in default.

Far from backing off of those assertions, Cabinet Chief Jorge Capitanich said Judge Griesa had been paralysed by his own lack of understanding of the case and that no new talks had been scheduled with the hedge funds.

Holders of restructured bonds have asked Griesa to release money that Argentina had deposited in June, intended as a coupon payment.

Mr Capitanich criticized the judge for not acting on those requests.

In 2012, Judge Griesa ruled that Argentina could not repay holders of restructured debt without also paying hedge funds their court award of $1.33 billion plus interest at the same time.

Argentina says it met its obligation to the holders of restructured bonds when it deposited $539 million into the account of intermediary Bank of New York Mellon in June. 

Griesa called the deposit illegal and ordered the money frozen.

As a result, Argentina effectively missed the coupon payment after a grace period ended on July 30, pushing it into default on its restructured debt.

With no negotiations scheduled, the case was in limbo while international banks struggled to reach a deal to buy some of the Argentine debt held by the hedge funds led by Elliott Management Corp and Aurelius Capital Ltd.

Argentina has long accused the judge of overstepping his bounds and being partial toward the funds, which bought Argentine bonds at steep discounts and are characterized by President Cristina Fernandez as "vultures" out to wreck her country's finances in their pursuit of huge profits.

The case could get a lot messier should holders of Argentina's newly defaulted debt decide to declare principal and interest immediately due. 

The move, known as acceleration, could complicate efforts to put the country's debt woes to rest.