Argentine economy minister in New York for last ditch talks
NEW YORK/BUENOS AIRES (Reuters) - Argentine Economy Minister Axel Kicillof unexpectedly arrived in New York on Tuesday to join last-minute debt negotiations with "holdout" investors in a bid to avert a default.
After a long battle in the U.S. courts, Argentina has until the end of Wednesday to either pay in full the hedge funds that rejected its restructuring on their defaulted bonds, cut a deal or win a stay of the court order that triggered the deadline.
Argentina's isolation from global credit markets since its 2002 default on $100 billion means a default would be highly unlikely to cause financial turmoil abroad, but it would hurt a domestic economy already in recession.
Kicillof's appearance at the office of the court-appointed mediator presiding over the negotiations was his first in more than three weeks. The scant progress made in talks, and Kicillof's absence, had raised questions over Argentina's commitment to reach a settlement with the holdouts.
The two sides have not met face-to-face.
The minister, who this year brokered deals with the Paris Club of creditor nations and Spanish energy giant Repsol, made no comment to reporters staking out Pollack's office.
Holders of Argentina's euro-denominated exchange bonds earlier on Tuesday urged U.S. District Judge Thomas Griesa to facilitate a settlement by suspending his ruling.
The veteran judge previously rejected Argentina's request for a stay, but he could respond differently to bondholders.
The euro bondholders said they would facilitate a deal by waiving the so-called RUFO clause that prevents Argentina from offering other investors better terms than it offered them. They would also try to get holders of exchanged bonds under other legislations to waive the clause. "Obtaining a waiver of the RUFO clause, however, will take time," they said.
Tuesday's meeting in New York shifted sentiment on Argentina's blue chip MerVal stock index which reversed early losses to close up 6.5 percent.
In its latest legal maneuver, Argentina appealed a portion of an order from Griesa on Monday permitting Citibank to pay certain bond holders with funds deposited with the bank by the Argentine government.
The appeal appears to take issue with Griesa?s warning that his order permits Citi only to make the next scheduled payment on July 30 but not subsequent payments.
SPECULATORS
Various South American leaders on Tuesday rallied behind Argentine President Cristina Fernandez, castigating the holdouts as financial speculators menacing the entire region.
"The problem that's affecting Argentina today is a threat not just to a brother nation. It affects the entire international financial system," Brazilian President Dilma Rousseff said. "We cannot accept that the actions of a few speculators put the stability of entire countries at risk."
Christine Lagarde, the head of the International Monetary Fund, said on Tuesday that an Argentine default would unlikely prompt broader market repercussions given the country's relative isolation from the financial system.
For many years, the country declined to negotiate with the holdouts who bought its distressed debt on the cheap, slamming them as "vultures" picking over the carcass of its default.
But after a slew of defeats in the U.S. courts, tough-talking Fernandez has been forced to the negotiating table just as her government battles runaway inflation and reserves that hit an eight-year low this year.
A default had been looking increasingly likely over the past few days. Argentina's debt insurance costs hit six-week highs on Tuesday.
Argentina's dollar-denominated Par bonds rose strongly on Tuesday on the over-the-counter market as investors who expected bondholders could accelerate the series in the case of a default and call for immediate payment piled into the paper.
"If there is a default, and given the Par is the cheapest series, they are acquiring these bonds," said Roberto Drimer at the local consultancy VatNet.
Par bonds closed up 2.3 percent at $51.05 while Discount bonds were down 1.2 percent to $82.55.
(Additional reporting by Svea Herbst-Bayliss in Boston, Jonathan Stempel in New York, Diego Ore and Deisy Buitrago in Caracas; Writing by Sarah Marsh and Richard Lough; Editing by Leslie Adler and Andrew Hay)