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  HOME | Argentina

Argentina Reaches Bond Payment Agreement with Holdout Creditor, Mediator Says

WASHINGTON – Argentina has reached a deal with one of the creditors that won a judgment in a U.S. court over bonds the South American country defaulted on in 2001, the court-appointed mediator said.

Attorney Daniel Pollack, who was appointed by Thomas Griesa, a U.S. federal judge in Manhattan, to oversee Argentina’s negotiations with its holdout bondholders, said Thursday that the South American country and Capital Markets Financial Services reached an agreement in principle on a cash payment of $110 million.

Pollack said the accord stems from Argentina’s Feb. 5 proposal to make a combined $6.5 billion cash payment to the holdout creditors, which filed nearly $10 billion in claims on the bonds.

That offer came after business-friendly President Mauricio Macri took office in December, replacing leftist Cristina Fernandez, who had slammed the holdouts as “vultures.”

In early February, Argentina – which has been shut out of international capital markets since the massive default – settled with a group of 50,000 holdout Italian retail bondholders, agreeing to pay them $1.35 billion. It also has reached a settlement this month with two funds – Montreux Equity Partners and Dart Management.

The holdout creditors refused to take part in 2005 and 2010 restructurings in which the vast majority of Argentina’s creditors accepted steep haircuts on the sovereign bonds, which were issued under U.S. law.

Griesa ruled in favor of one group of holdouts in 2012, including Elliott Management Corp. founder and CEO Paul Singer’s NML Capital Ltd, a lead creditor that has not yet reached an agreement with Argentina.

Citing a violation of the bonds’ “pari passu” (equal treatment) clause, he ordered Argentina to pay them $1.3 billion plus interest before making further payments to bondholders who accepted the restructurings.

Other holdout bondholders such as Capital Markets Financial Services, known as “me too” litigants, won similar judgments against Argentina in Griesa’s court last year, bringing the total owed by the South American country to the litigating bondholders to around $10 billion.

Argentina was blocked from making interest payments to its exchange bondholders (the 93 percent of creditors that accepted the 2005 and 2010 restructurings) when it refused to comply with Griesa’s ruling, leading credit ratings agency Standard & Poor’s to lower the country’s credit rating to “selective default” in 2014.

NML Capital Ltd. and other hedge funds acquired Argentine bonds on the secondary market at large discounts following Buenos Aires’ massive 2001 debt default.

The origins of Argentina’s default, a decision adopted amid a financial meltdown and economic depression, go back to Argentina’s 1976-1983 military regime, which presided over a 465 percent expansion in public indebtedness.

 

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