Argentines, Bond Holdouts Emerge From NY Meeting, No Resolution

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Argentine officials and the holdout investors it has battled for years over its catastrophic 2002 default met separately with a court-appointed mediator on Friday, emerging after five hours of discussions without a resolution.

This is the closest the two sides have come to a face-to-face negotiation, rather than just their lawyers battling it out before U.S. District Judge Thomas Griesa in New York.

“They each presented their positions to me, but not in the presence of the other side. No resolution has been reached. It is my hope that there will be future dialogue,” Daniel Pollack, the Special Master appointed by the court to act as a mediator, said in a statement after the meeting.

Without a deal, Latin America's No. 3 economy risks tumbling into a new default as it battles a recession, one of the world's highest inflation rates and dwindling foreign reserves.

Both sides also issued statements that kept largely to their establish positions.

Argentina continues to demand Griesa reinstate a stay, or suspension, on his judgments while talks continue. Holdouts say Argentina still refuses to negotiate without any pre-conditions.

The Argentine Economy Ministry's statement said a stay was “essential”, especially given the size of the claims in question and that it was willing to continue talks.

According to one source briefed on the meetings, it was Argentina that insisted the two sides not meet face-to-face, forcing Pollack to engage in shuttle diplomacy at his 27th floor office on Park Avenue.

“Argentina is still refusing to negotiate with its creditors, either directly or indirectly, about any aspect of this dispute, and we have not heard that it has any plans to change course,” Jay Newman, portfolio manager at lead holdout creditor firm, Elliott Management Corp's NML Capital Ltd, told Reuters through a company spokesman.

“Simply put, we have not seen any indication that Argentina is serious about even beginning a negotiation,” Newman said.

A stay would give Argentina more time beyond a July 30 deadline for a coupon payment to be distributed to bondholders who agreed to two prior restructurings in 2005 and 2010.

The holdouts have said they are willing to discuss an accommodation to let Buenos Aires pay other bondholders facing a potential default if negotiations made good progress before July 30. But they also argued to Griesa there were no grounds for granting a stay.

Argentina's delegation included Finance Secretary Pablo Lopez and Deputy Attorney General Javier Pargament, in addition to their lawyers from Cleary Gottlieb Steen & Hamilton. Economy Minister Axel Kicillof, who met with Pollack for four hours on Monday, was absent.

Leaving Pollack's office building expressionless and without uttering a word, the delegation pushed its way through a phalanx of reporters to two waiting government cars and sped off north into New York's rush hour traffic.

Five minutes later Newman emerged from the building, turning immediately away from the press and headed south.

Griesa's order calls for Argentina to either pay holdouts at the same time it makes a payment on restructured debt or be barred from paying anyone.

Buenos Aires deposited only the June 30 coupon payment of $539 million for restructured debt holders in Bank of New York Mellon's account at the central bank, where it sits.

BNY Mellon, the world's largest custody bank, fears falling afoul of Griesa's ruling and has asked him what they should do with the cash.

The majority of investors who exchanged their defaulted bonds for new issues in 2005 and 2010 got between 25 cents and 29 cents on the dollar, generally viewed as being among the most onerous terms a government has ever offered in recent memory.

Holdout creditors, led by Elliott's NML Capital Ltd and Aurelius Capital Management, won a judgment of $1.33 billion plus accrued interest. Their case was upheld on appeal and the U.S. Supreme Court declined on June 16 to take the case, effectively ending the government's legal recourse.

Elliott and Aurelius are two hedge funds that specialize in buying up deeply discounted or distressed debt and negotiating profitable settlements, often through the use of the courts.