BUENOS AIRES--Argentina's negotiating team is set to return home
Friday after a meeting earlier in the day with a court-appointed
mediator in New York failed to resolve a high-stakes dispute over
unpaid debts that could see the country default as early as next
week.
Argentine officials briefly met alone Friday morning with the
mediator, Daniel Pollack, who said they would return to Buenos
Aires to seek instructions from their government. Mr. Pollack said
he later spoke by telephone with representatives of the hedge funds
that have sued Argentina to collect on debt it stopped paying 13
years ago.
"No resolution of the impasse between the parties has been
reached," Mr. Pollack's office said in a statement. "I anticipate
that there will be further communications with the parties prior to
the default date."
Argentina's Economy Ministry said in a statement it expects
talks with Mr. Pollack to continue in coming days. A spokesman for
Elliott Management Corp. affiliate NML Capital Ltd. declined to
comment.
Argentina's benchmark Merval stock index was down 2.1% in
afternoon trading, led by declines in shares of state oil company
YPF SA and banking concern Grupo Financiero Galicia SA. The 2033
discount bond fell 3.3%, to 1,190 pesos ($145).
Argentina has largely run out of legal options after the U.S.
Supreme Court on June 16 declined to hear its appeal in the case.
That left in place U.S. District Judge Thomas Griesa's ruling that
Argentina has to pay the hedge funds when it pays investors who own
bonds the country issued in debt restructurings following the 2001
default.
Judge Griesa blocked interest payments for $539 million on some
of those bonds after Argentina deposited the funds with the bond
trustee last month, but didn't pay the hedge funds. Argentina has
until Wednesday to get that money to bondholders or run the risk
defaulting.
Earlier this week, the judge told Argentina and hedge funds to
meet "continuously" with Mr. Pollack to reach a deal ahead of next
week's payment deadline.
President Cristina Kirchner's government has argued that paying
the hedge funds the $1.6 billion they have won in U.S. courts could
bankrupt the country by triggering more than $120 billion in claims
by other holdout creditors and investors who own restructured
bonds.
The administration says a major hurdle to negotiating a
settlement now is a clause in the restructured bonds that allows
investors to demand the same treatment if Argentina cuts a better
deal with holdouts.
Argentina wants Judge Griesa to suspend his ruling until after
the clause expires at the end of this year so the country can keep
paying its bonds while it seeks a resolution to the creditor
dispute, Mrs. Kirchner's cabinet chief, Jorge Capitanich, told
reporters Friday morning.
Argentina's battle with the hedge funds stems from its default
on some $100 billion in debt in 2001. The country offered holders
of the defaulted bonds new securities valued at about 33 cents on
the dollar in 2005 and 2010.
Between the two swaps, investors agreed to exchange almost 93%
of defaulted bonds eligible for restructuring. However, hedge funds
led by NML Capital and Aurelius Capital Management LP declined to
accept the offer and instead sued for full repayment.
Shane Romig contributed to this article
Write to Ken Parks at ken.parks@wsj.com
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