NEW YORK: A US judge on Monday appointed a Manhattan attorney to supervise talks between Argentina and hedge fund bondholders as Buenos Aires seeks to avoid defaulting on its debt in a week's time.
New York district court judge Thomas Griesa named the mediator after the government of President Cristina Kirchner asked him to organize negotiations with its creditors.
The move raised hopes that a deal could be done before a June 30 deadline for Buenos Aires to pay back possibly billions of dollars to creditors, a week after the US Supreme Court turned down the country's last-ditch appeal against bondholders it labels "vultures".
Buenos Aires had warned that the court decision put it in the position of defaulting on its debt for the second time in 13 years.
The news of impending negotiations sent Argentine stocks soaring, with the Merval 25 index adding nearly 9 percent.
Griesa named Daniel Pollack as "special master to conduct and preside over settlement negotiations" in the case, which pits Argentina against hedge funds who refused to take part in a restructuring of the debt on which Buenos Aires defaulted in 2001.
Pollack is an attorney with the McCarter & English law firm, and specializes in financial litigation. Griesa's order says that Pollack may conduct talks in public or in private, and that both parties are to offer him their "full cooperation."
Thorny decade-old dispute:
Last week, Argentina lost a Supreme Court challenge to a 2012 ruling by Griesa, meaning the country must pay the hedge funds "holdouts" from its 2005 and 2010 debt restructuring the full value of their bonds at the time it makes its next regular debt payment, scheduled for the end of this month.
While the two funds which sued Argentina in the case, NML Capital and Aurelius Management, hold about $1.3 billion worth of bonds, Argentina says the court decision would force it to pay all holdouts, more than $15 billion.
That is more than half of the country's foreign exchange reserves. If indeed it does have to pay all of that on June 30, the Argentine government says it would have to default.
"In this context, we are seeking conditions for negotiation that are just and equitable for 100 percent of the bondholders," Kirchner's cabinet chief Jorge Capitanich said Monday.
In addition to asking Griesa to help organize negotiations, economy Minister Axel Kicillof said the country was asking for him to place a stay on implementing the court decision, which would give the talks more time.
Since the June 16 Supreme Court ruling, Buenos Aires has alternately threatened to default on its debt, to negotiate a solution, or to move the legal jurisdiction over its performing, restructured debt from the United States to Argentina, in order to make it possible to service that debt without paying the holdouts.
But Griesa has made clear his decision means the country cannot pay one group without paying the other, and that an attempt to relocate the restructured debt to Argentine jurisdiction is prohibited under his 2012 ruling.
And he has threatened banks and financial clearing houses with charges if they take part in any Argentine effort to avoid paying either set of creditors.
The issue dates to Argentina's default on nearly $100 billion of debt in 2001. More than 90 percent of bondholders agreed to take large write-downs on the bonds' value to help the government rebuild its finances.
But holdouts, including many like NML and Aurelius which bought the debt on the market for pennies on the dollar as the country fell into default, have fought in US courts to be paid back 100 percent, which would bring them huge profits on their investments.
Argentina says that is unfair to the other bondholders and violates the principles that underpin sovereign debt restructuring.
Also on Monday, the "American Task Force Argentina", a private group lobbies on behalf of the hedge funds, downplayed claims that enforcing the ruling would necessarily bankrupt Argentina.
"There is no court order to pay $15 billion," said AFTA chairman Robert Shapiro. "It's a number invented by the Argentine government, and which it appears to be using as an excuse to not pay its creditors."
He said they only need for the moment to pay the $1.3 billion owed to NML and Aurelius, and referred to reports of possible deals with banks that could spread that figure over a longer period.
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