The government of Argentina has asked a US judge to delay a sentence to allow it to meet a debt payment scheduled at the end of the month while talking with other creditors without the risk of an imminent debt default.
In a letter to US District Judge Thomas Griesa, Argentina's lawyers are asking for a "stay" in a decision that orders the South American country to pay as much as $1.5bn to bondholders who have refused to restructure their debt following a record-breaking 2001 default of almost $100bn, economy minister Axel Kicillof said today.
The Argentinian lawyers are effectively asking Griesa to reinstitute a stay that a US appeals court lifted on 18 June, two days after the US Supreme Court unexpectedly declined to consider the government's appeal of a ruling that stated the country cannot service its restructured debt in New York without also paying those who refused to restructure.
"We think it is essential that Judge Griesa grants this suspension measure so that Argentina can continue paying its restructured bondholders and in this way carry out a dialogue" with the holdouts, Kicillof said.
In a sign that Griesa is encouraging talks without yet approving the stay, he issued an order this afternoon appointing a "special master" to "conduct and preside over settlement negotiations" between Argentina and the holdouts.
The letter to Griesa is the latest move in the Argentinian government´s shift toward conciliation that began on 20 June, when President Cristina Fernandez de Kirchner said her government would "ask the judge to generate the conditions to reach an agreement that benefits 100pc (of bondholders), because there are laws to respect." That was followed by full-page advertisements on several top US newspapers titled: "Argentina wants to continue paying its debts but they won't let it."
Shale-rich Argentina has a 30-day grace period to fulfill the coupon payments due on 30 June before it would default, an event that would affect financing for state-controlled oil company YPF and its joint venture partners.
Argentina has been locked in a years-long bitter dispute with hedge funds the government calls "vulture funds" that, unlike 92pc of bondholders, refused to accept restructurings in 2005 and 2010, receiving some $0.25-0.29 on the US dollar.
Resolving the thorny matter is the last hurdle before Argentina can begin to re-issue international debt. In recent months, the government reached a deal with the Paris Club of creditors, paid compensation to Spain's Repsol for its 2012 expropriation of a majority stake in YPF and paid some international arbitration cases against the government.
The country's debt imbroglio makes it harder for YPF to raise much-needed upstream capital and is likely to put foreign investment in the country's plentiful shale deposits on hold.
The uncertainty created by the situation with the debt holdouts "makes it very difficult for YPF to return to the international capital markets," says Mauricio Roitman, an analyst at Montamat & Asociados, a local energy consultancy. "In this context it will be very difficult for YPF and the provinces to obtain direct investment partners."
Argentina´s strategy is not without short-term risks. The holdout funds, including New York-based Elliott Capital and Aurelius Capital Management, could call for the seizure of Argentinian assets abroad if they fail to come to an agreement.
Neither fund responded to requests for comment.
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