Argentina, Bondholders Have Exchange Of Euphemisms, Hand-Signals, Code Words

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So Richard Perry and 49 or so friends have been dropping in on Argentina’s finance minister—who’s on another vacation in New York—for a little chat about, you know, the non-defaultdefault. Because, as holders of Argentina’s restructured debt, they’d really like to get paid, preferably on time next time.

Unfortunately for them, they are under an interdict from Judge Thomas Griesa not to do anything that might be construed as helping the excommunicated Argentines from ignoring or skirting his rulings some more. And Argentina is under a self-imposed interdict which keeps it from talking about waiving a clause for fear of triggering that clause. Or because it’s a handy excuse to not talk to Paul Singer. Whatever. Either way, the meetings must have sounded like an FBI wiretap of John Gotti ordering a hit.

"It was an exchange of views," one fund manager who met with Argentina's Finance Secretary Pablo Lopez this week told IFR on Thursday.

"They probably wanted to know whether we would participate in a swap with local law (bonds), but they didn't ask the question directly. I pre-empted it by saying we wouldn't."

So the local-law bond exchange is doomed. No matter. There are domestic political points to be won! And sovereignty to be defended! And a woman desperately trying to save face! And a government that can’t walk and chew gum at the same time!

Argentina's Senate on Thursday passed a bill aimed at circumventing U.S. court decisions regarding its defaulted debt by changing payment jurisdiction, sending the proposal to the lower house Chamber of Deputies for final approval.

"I don't think they have the know-how and the attention span to look beyond one option at the time. Right now, they are exploring this option," said the first fund manager.

If it all makes your head hurt a bit, you’re not alone. Argentine economics rock-star Domingo Cavallo, who saved the country’s economy in the 1990s and then tried to fix the whole default mess way back in 2001, went seriously off-message at a confab the IMF threw this week to celebrate itself.

“Argentina should comply with Judge Griesa’s decision,” Mr. Cavallo said on Wednesday at a conference to commemorate the 70th anniversary of the Bretton Woods system of global financial cooperation….

“It’s a disaster,” he said, referring to the inflation and capital flight that has afflicted the economy of late. “She wants to blame what is happening now on the vultures.”

Elsewhere at the birthday party, IMFers put on their best grim, brave face and put forward a solution to the problem they’ve created by enticing countries like Argentina into borrowing way more money than they can ever pay back, and then forcing them to borrow more when they can’t pay back the original loans.

The fund’s proposal, which would lock in private sector bond investors by having their maturities extended so that they could not cut and run, faces opposition from many investors and their trade organizations….

Under the new proposal, its hoped that the next time a country with serious debt problems approaches the fund, the painful but necessary debt restructuring happens sooner rather than later.

Argentina swap plan gets cold reception in New York [Reuters]
Bondholders in Talks With Argentina On Legal Strategies [WSJ]
Argentina’s Lopez Said to Meet With Investors Over Debt Swap [Bloomberg]
Argentina Senate passes debt swap plan in defiance of U.S. courts [Reuters]
Argentine Economist Says Bond Holdouts Should Be Paid [DealBook]
I.M.F. Considers Rule to Force Bondholders to Share Cost of Restructuring [DealBook]

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