It looks like Argentina has blinked.
The South American country, which has been locked in a legal standoff with Paul Singer’s Elliott Management, appears willing to negotiate with the hedge fund instead of defaulting on some $24 billion in bonds.
Manhattan federal judge Thomas Grisea has ordered Argentina to put $1.3 billion in escrow by Dec. 15 to pay Elliott and other “holdout” bondholders who refused to participate in two previous debt restructurings.
In an emergency motion requesting the appellate court strike down the order, Argentina mentioned holding yet another debt exchange to satisfy Elliott.
After it defaulted in 2002, Argentina held two such exchanges, convincing 92 percent of its bondholders to accept about 35 cents on the dollar.
If the court had suggested a similar proposal for Elliott, Argentina could have asked its lawmakers to reopen the debt exchange to pay the Manhattan hedge fund, the motion said.
Under the country’s current laws, “It cannot present a proposal that treats some creditors better than others, and it cannot fund an escrow,” said attorney Carmine Boccuzzi.
Griesa earlier ruled that each time Argentina paid the exchange bondholders, who took a haircut, it must pay Elliott and the other holdouts 100 percent.
Argentina President Cristina Kirchner has repeatedly said Argentina will not pay “one dollar” to holdouts, but negotiating through an exchange offer would give her political cover.
Sources said that Herman Lorenzino, her minister of economy, had suggested doing so several weeks ago but she balked.
“Reopening the exchange would give Argentina a variety of options on how to negotiate,” said Hans Humes of Greylock Capital, one of the restructured bondholders.
Sources close to Elliott have long said the fund is willing to negotiate with Argentina, but the country has refused. Those close to Argentina, however, have said Elliott’s negotiating posture has been just to demand 100 percent.