Tuesday, July 22, 2014 12:46 pm
NY judge orders 24-7 Argentina debt talks
U.S. District Judge Thomas Griesa in Manhattan issued the order from the bench after describing why Argentina must live up to documented promises it made to bondholders it now demonizes as "vultures" before it experienced a record $100 billion default in 2001.
He said nonstop negotiations set to begin at 10 a.m. Wednesday were the best way to deal with complex issues because a default "is about the worst thing that ... I can envision."
"I don't want that to happen," he said. "People will be hurt by that, real hurt. Not vultures being hurt but real people will be hurt."
Jonathan Blackman, a lawyer for Argentina, said the issues were too complex to resolve by the July 30 deadline and thus a settlement "simply can't be done by the end of this month."
He said one problem is that U.S. bondholders who are owed $1.5 billion after refusing to exchange their bonds for lower-valued bonds after the 2001 default are insisting they receive 100 percent of what they are owed.
"We want to negotiate a settlement with everyone, but to do that requires movement," Blackman said.
He said that until the end of this year, the 92 percent of bondholders who exchanged their bonds are entitled to whatever improved treatment is given to bondholders who did not exchange for lower rates.
He renewed Argentina's request for a stay of Griesa's orders, but the judge quickly rejected that.
"In my view, the stay application is not something necessary to a negotiation or settlement," Griesa said.
He also said "every single problem" described by Blackman can be dealt with in a settlement aimed at averting default.
"There are ways to somehow avoid a default," the judge said.
He said lawyers must meet "promptly and continuously." But he added: "I don't mean anything absurd. I don't mean that the finance minister of the Republic of Argentina has to personally be in New York 'round the clock, of course. But he undoubtedly has staff."
The judge also seemed surprised when he was told by plaintiffs' attorney Edward A. Friedman that Argentina had transferred $200 million to $300 million more than previously thought at the end of June to be paid to bondholders who exchanged their bonds. He reserved decision on a request by plaintiffs to block the payments.
Citibank attorney Karen Wagner disputed Friedman's description of the amount of money sent through a Citibank branch in Argentina and other financial institutions, saying the characterization of it as 25 percent of the money Argentina owed to bondholders who switched their bonds for lesser valued ones seemed inflated.
She said she did not believe the payments should be subject to the judge's orders because they were never addressed directly in the orders and because they move through a Citibank branch in Argentina that faces severe civil, regulatory and criminal risks in the South American nation if it refuses to process the payments.
The Bank of New York Mellon Corp. is still holding $539 million that Argentina deposited for bondholders at the end of June. Griesa praised the bank for complying with his orders not to pass the money along.
The proceeding added to the drama surrounding the deadline for Argentina to pay U.S. hedge funds.
Griesa has blocked U.S. banks from letting Argentina pay the vast majority of its bondholders who accepted lower-valued bonds unless it pays the U.S. hedge funds.
Argentina's economy minister earlier this month participated in negotiations with a court-appointed mediator.
The plaintiffs in the court action are led by New York billionaire Paul Singer's NML Capital Ltd.