Argentine debt holdout urges talks, says deal still possible

By Daniel Bases

NEW YORK (Reuters) - Aurelius Capital Management, one of the lead holdout creditors seeking to settle with Argentina over sovereign debt payments from its 2002 default, said on Monday the government faces a new crisis on July 30 unless it engages in serious negotiations.

Argentine officials and the holdout investors met separately with a court-appointed mediator on Friday, emerging from his offices after five hours of discussions with no resolution and no further talks scheduled.

Both sides have ramped up the rhetoric to explain why they are on one level eager to negotiate and on another at pains to show why the other side is not engaging.

"Absent a deal, Argentina’s next sovereign debt crisis will start on July 30. There is still time to avoid that outcome, but only if the Argentine government commences serious discussions with us immediately," Aurelius said in a statement.

The firm said that together with other holdout creditors, it has offered to meet with the government anytime, anywhere, but has been rebuffed.

"Argentine officials refuse to meet with us or even negotiate with us indirectly. Sadly, this approach gambles with the livelihoods and futures of the Argentine people."

In 2012, U.S. District Judge Thomas Griesa in New York awarded the holdouts $1.33 billion plus accrued interest in a case based upon the pari passu, or equal treatment, clause used to sell the bonds originally in 1994.

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.

Argentine officials in Buenos Aires and in its Washington, DC, embassy were not available for comment when contacted by Reuters.

Argentina continues to request a stay, or suspension, of Griesa's judgments while talks continue. That would give the nation more time beyond a July 30 deadline for a coupon payment to bondholders who agreed to two prior restructurings in 2005 and 2010.

The government says it cannot voluntarily offer better terms for a restructuring with holdouts because of a provision called the Rights upon Future Offers, or RUFO, which expires on December 31. It is designed to stop anyone getting a better deal than the exchange bondholders.

Legal experts have not dismissed the clause as a hurdle to a deal, but they also believe it can be overcome.

The holdouts have said they would discuss an accommodation to let the government pay the other bondholders facing potential default if negotiations to settle the legal dispute have made good progress before July 30. But they also argued to Griesa that there were no grounds for granting a stay.

"On Friday Argentina’s Ministry of the Economy issued yet another statement calling for the pari passu injunction to be stayed," Aurelius said. "This is puzzling, because the District Court refused that stay just last month.

"Before that, the injunction had been stayed for nearly 2-1/2 years while Argentina took its appeals. During that period, Argentina rebuffed countless settlement overtures, even by the appellate court. Argentina has demonstrated itself wholly undeserving of another stay now."

Argentine cabinet chief Jorge Capitanich made no mention of the debt talks in his regular briefing on Monday morning.

Buenos Aires said in a statement on Friday that a stay is "essential" given the size of the claims, and that it was willing to continue talks but did not specify if it would or when. It has also argued that it is being pushed into default by the holdouts.

During the World Cup final on Sunday, state-run Argentine television once again screened a fiery, nationalistic advertisement, playing sound bites of Latin American leaders rallying behind the country in its battle against the holdouts.

Argentina argues that should it work out a deal with holdouts, it would be subject to paying exchange bondholders under RUFO as well as "other" holdouts with unrestructured debt who are not part of the Elliott/Aurelius group.

The government puts its liability for "other" holdouts at $15 billion, but Moody's Investors service says the claims total half that amount - $7.5 billion if all the unrestructured debt under New York law is claimed. That figure rises to $12 billion, Moody's said, if all holdout claims in U.S. dollars and euros were to seek payment.

Global law firm Bingham McCutchen said in a statement late on Sunday that it organized what it called an Ad Hoc Group of Argentina's "other" holdouts. It invited others to join in an effort to build a stronger bargaining position for any potential negotiations.

(Additional reporting by Sarah Marsh in Buenos Aires; Editing by Lisa Von Ahn and Dan Grebler)