Argentina’s banks are floating a last-ditch plan to avert another default by the debt-ridden nation and end a standoff with holdout investors in the US.
Local banks would pay off New York financier Paul Singer and other bondholders with dollar-denominated Argentine bonds, with Argentina agreeing to reimburse the banks with the bonds now in litigation, according to an Argentine press report.
For the plan to work, Manhattan federal judge Thomas Griesa would have to institute a stay of his orders requiring Argentina make a $1.65 billion payment to the Singer-led group when it pays bondholders who agreed to a debt exchange after the country’s previous default in 2001.
The Singer group did not agree to the swap and demands to be paid in full. Argentina has refused to pay the holdout investors, calling the group of mostly New York hedge funds “vultures.”
The country’s $539 million June 30 payment to the exchange bondholders will be technically in default, after a grace period of 30 days, at 12:01 a.m. Thursday.
Because the banks — and not Argentina — would make the payment, the new plan would avoid triggering a clause in the exchange bonds that could subject Argentina to more litigation from those bondholders.
Meanwhile, Axel Kicillof, Argentina’s economy minister, flew to New York Tuesday to meet with a court-appointed mediator and try to hash out a deal with the holdouts.
Kicillof and Singer’s representatives met Tuesday night for several hours, according to mediator Daniel Pollack.
“These were the first face-to-face talks between the parties,” said Pollack, adding that “the issues that divide the parties remain.”
The talks are continuing on Wednesday.
One of Argentina’s newspapers, Ambito Financiero, reported Tuesday that Banco Marco, which had designed Argentina’s debt swap in 2005, was leading the “anti-default operation.”
Even if it goes through, Argentina would still be on the hook for an estimated $15 billion in other holdout claims.