NEW YORK — The new Argentine government reopened talks with bondholders in New York Wednesday that for years have blocked the struggling country's access to global capital markets.
Officials said they plan to submit a proposal later this month, which they hope will finally provide a resolution to the long-running financial crisis.
Talks between bondholders and representatives of the new government of President Mauricio Macri, who has pledged to reform and revitalise the Argentine economy, opened in Manhattan under the guidance of the court-appointed mediator Daniel Pollack.
"We'll be presenting Argentina's proposal during the week of Monday, January 25 to Pollack and to the holdout firms" Luis Caputo, an official representing Buenos Aires said at the close of five hours of negotiations on the first day of talks.
The previous administration of Cristina Kirchner had refused to compromise with the creditors, mainly hedge funds it branded "vultures," after a US court ordered the country to pay the full value of bonds that Buenos Aires defaulted on some 15 years ago.
The leaders of the so-called "holdout" group, the hedge funds NML Capital and Aurelius Capital Management, bought up Argentine debt cheaply around the time of the default and over the next decade refused to join 93 per cent of bondholders in restructuring the debt.
Speaking in Buenos Aires on Wednesday, Argentine Economy Minister Alfonso Prat-Gay said the South American country would negotiate "with toughness" but was committed to finding an agreement.
On Tuesday, Macri said he hoped for a "reasonable agreement" with the creditors, who have demanded 100 per cent payment of their bonds even though most of the creditors in the country's $100 billion default in 2001 accepted sharp losses in a negotiated debt restructuring.
"We will tell the mediator that there has been a change, another vision for our debts and how to stop being a defaulter and to resolve the pending issues," Macri said.
To the great dismay of Argentina and its restructured bondholders, NML and Aurelius won a New York court judgement in 2012 that ordered Argentina to repay the full value of their bonds.
The decision roiled the sovereign bond world.
The court said, moreover, that Buenos Aires could not make payments on the restructured bonds without first paying off in full the two hedge funds. And it forbade banks from handling any other bond payments before the hedge funds were paid.
Kirchner's government refused, and talks on an ostensible compromise went nowhere.
Heavy price tag
The two hedge funds hold about $1.3 billion worth of bonds, whose accrued value is now about $1.7 billion.
Last October, the New York court further ruled that 49 other holdouts were covered by the 2012 ruling and also had to be paid first, adding another $6.1 billion to the sum Argentina is ordered to pay. Pollack has said the total amount owed to holdouts is around $10 billion.
The Argentine economy minister said the US court ruling gave the creditors lavish interest payments – up to 95 cents out of every dollar Buenos Aires has been ordered to pay, in the case of certain bonds.
"That is what we want to discuss quickly and resolve the problem," he said.
But he blamed the Kirchner administration for the heavy price tag.
"This is the cost of washing our hands of the problem for more than 10 years," he said.
With foreign reserves believed to be at less than $30 billion, Kirchner's government said it could not afford to pay, and Macri's government will face the same challenge.
The conservative new president has launched into a program of difficult structural reforms for the economy that includes a more than 30 per cent devaluation of the peso.
He has indicated he wants to resolve the problem with the bond holdouts quickly, as it impedes the country's access to global capital markets.
Within days of assuming office on December 10, Macri sent representatives to let Pollack know the country was ready to negotiate in earnest. — AFP