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Business

Argentine president surrenders to hedge fund titan, will negotiate

By
Michelle Celarier
Published June 18, 2014, 11:11 p.m. ET

Look who’s talking.

Argentina, after years of insisting it wouldn’t negotiate with a handful of holdout bondholders — a group its president repeatedly called “vultures” and “extortionists” — finally agreed Wednesday to sit and talk with the group.

It’s amazing what the full force of the US legal system can do even to the most stubborn of positions.

Argentine President Cristina Kirchner, who continued to toss verbal grenades at the bondholders and a Manhattan judge even after the US Supreme Court on Monday brushed aside her legal move, quickly changed her tune after the judge said her latest proposal would violate his order.

On Monday and Tuesday nights, Argentine officials, including Kirchner, hinted they would seek to get around paying the holdout bondholders, led by hedge fund mogul Paul Singer, by having new bonds issued outside the US.

That seemed to be the last straw for a peeved Judge Thomas Griesa.

“You can talk about negotiating, but as a judge what I want is a legal mechanism to prevent another situation where Argentina can simply laugh off a judgment,” Griesa said, referring to the decade Argentina has spent refusing to pay what it owes some of its creditors.

The new restructuring plan gained some momentum this week when the high court denied Argentina’s appeal of Griesa’s orders.

Griesa had ruled that the country must pay Singer and his allies roughly $1.5 billion — owed on bonds the country defaulted on 13 years ago — when it pays some 93 percent of bondholders who agreed to an exchange offer.

Those bondholders accepted 25 to 35 cents on the dollar, while the holdouts like Singer wanted 100 percent, plus interest.

Following the high court ruling, Kirchner and Economy Minister Axel Kicillof indicated the embattled country was moving forward with plans to set up a new exchange of bonds so that the majority bondholders — who now own about $30 billion — would get their semi-annual payouts outside the reach of US courts.

“The president’s speech is a problem,” said Griesa in a hastily called hearing. “It would have been better had she not referred to holdout creditors as extortionists.”

While Argentina was discussing its new exchange plan in Buenos Aires, its lawyers were in a New York courtroom telling Griesa that the country’s government officials were coming to New York next week to negotiate with the holdouts prior to a June 30 payout.

Lawyers for the country also want to meet with Griesa, said Argentina lawyer Carmine Boccuzzi.

Argentina has said that holdouts would be able to collect a total of $15 billion under the court ruling, which Boccuzzi said would be a “calamity” for the country’s economy. Singer alone stands to collect $3 billion.

News of the willingness to negotiate cheered Argentina’s exchange bondholders, who have feared Argentina will default to avoid paying Singer.

The judge’s remarks, however, cast a pall over the prospect of negotiations.

“It’s not market friendly to have the judge mad at you,” said one Argentine debt analyst who attended the hearing.