News / Americas

    Argentina, Creditors Settle 14 Years After Default for $4.6B

    U.S.-court appointed mediator Daniel Pollack speaks at a news conference in the Manhattan borough of New York City, Feb. 29, 2016, to announce that Argentina and its main holdout creditors have signed an agreement in principle to settle a sovereign debt d
    U.S.-court appointed mediator Daniel Pollack speaks at a news conference in the Manhattan borough of New York City, Feb. 29, 2016, to announce that Argentina and its main holdout creditors have signed an agreement in principle to settle a sovereign debt d
    Reuters

    Argentina and its main holdout creditors have reached a $4.653 billion agreement in principle to settle a 14-year-old sovereign debt default dispute, a deal that could help the country to return to international capital markets and revive its economy.

    The deal, agreed late on Sunday and announced by the New York court-appointed mediator Daniel Pollack on Monday, will see the four largest remaining holdout creditors get paid 75 percent of the amount outstanding on their judgments, including principal and interest.

    "This is a giant step forward in this long-running litigation, but not the final step," Pollack said in his statement.

    "The agreement in principle is subject to approval by the Congress of Argentina and, specifically, the lifting of the Lock Law and the Sovereign Payment Law, enacted under an earlier administration and which would bar such settlements," he said.

    Hedge fund Elliott Management, run by Paul Singer, brought numerous lawsuits against Argentina over the course of the dispute, with hearings before U.S. District Judge Thomas Griesa that were appealed but failed to gain a hearing before the U.S. Supreme Court.

    "He was a tough but fair negotiator," Pollack said, adding: "A settlement is, by definition, a compromise and, fortunately, both sides to this epic dispute finally saw the need to compromise, and have done so."

    FILE - A poster depicts U.S. District Court Judge Thomas Griesa, overseeing a case in which U.S. hedge funds are suing Argentina, as a vulture in Buenos Aires, Aug. 12, 2014.
    FILE - A poster depicts U.S. District Court Judge Thomas Griesa, overseeing a case in which U.S. hedge funds are suing Argentina, as a vulture in Buenos Aires, Aug. 12, 2014.

    The legal saga involved years of court battles, street protests in Buenos Aires, the seizure of an Argentine naval vessel, and increasingly distorted economic policy as the government tried to avoid settling with the holdout creditors.

    "We are pleased to have reached an agreement with Argentina. We are hopeful that the completed negotiations, held under the aegis of Special Master Daniel Pollack, have cleared the way for other plaintiffs to reach satisfactory resolutions as well," Elliott said in a statement Monday.

    The remaining largest holdout investors include Aurelius Capital Management, run by former Elliott alumni Mark Brodsky, as well as Davidson Kempner and Bracebridge Capital.

    A spokesman for Aurelius declined to comment.

    Despite the deal, the main holdouts filed a motion in court Monday urging Griesa not to lift the injunctions because there are many other plaintiffs who have not yet settled the dispute.

    The holdouts rejected two prior debt restructurings in 2005 and 2010 that paid out roughly 30 cents on the dollar. The investors who accepted those deals, referred to as exchange bondholders, have not been paid principal and interest on their bonds since a second default in the summer of 2014 resulting in part from New York court decisions.

    Intense talks in 2014 with the Fernandez administration ended without a deal and leaving in place an injunction by Griesa that no one would get their principal and interest unless all creditors were paid at the same time.

    New beginning for Argentina

    A final settlement would open financing options to Argentina's new president as he tries to improve the country's fiscal problems without imposing the kind of sharp spending cuts that have gotten previous Argentine leaders removed from office.

    FILE - Argentina's President Mauricio Macri waves to followers as he leaves Argentina's Congress after he was sworn in, in Buenos Aires, Dec. 10, 2015.
    FILE - Argentina's President Mauricio Macri waves to followers as he leaves Argentina's Congress after he was sworn in, in Buenos Aires, Dec. 10, 2015.

    President Mauricio Macri was elected in November promising free-market policies, following eight years of protectionism under Cristina Fernandez who refused to negotiate with hedge funds suing the country over its defaulted bonds.

    On Tuesday, Macri will preside over the opening of the 2016 congressional session.

    In his speech before lawmakers, he is expected to stress the need for Congress to approve a set of bills clearing the way for a deal with the holdout creditors.

    The holdout creditors will likely be paid from the proceeds of a large government bond offering. Under the terms of the agreement the holdout investors said they would not interfere with capital-raising.

    Argentina offered $6.5 billion to settle the claims filed in the U.S. courts that amounted to about $9 billion. Other creditors came forward earlier in February accepting the deal.

    If the deal with Elliott and the other main holdouts is closed, it would resolve more than 85 percent of the "pari passu" and "me-too" injunctions.

    Effect on local bonds

    Argentina's internationally traded bonds did not react to Pollack's announcement, according to JPMorgan's Emerging Markets Bond Index +. The price of local bonds traded over the counter in Argentina did not rise or fall on the news.

    "Investors had expected this. After the recent steep rise in Argentine bond prices, the announced had been discounted, bringing yields to an average 7.0 percent per year," said Gustavo Ber, a Buenos Aires-based markets consultant.

    Given Argentina's absence from the international capital markets, the nation has a low ratio of debt to gross domestic product, making it attractive to investors.

    "Under the Macri leadership one can see a path whereby the economic imbalances are tackled and it just becomes a much better investment destination. They'll be attracted by that investment story," said Stuart Culverhouse, head of research at emerging markets brokerage Exotix in London.

    "The implied yield at the moment would be about 8.25 percent on the restructured bonds so you could see that coming in to 7 to 7.5 percent. At that level it would be more than fair value so the scope for a big rally from here is probably limited," he added.

    So far, the 2033 U.S. dollar-denominated Discount bond is up just 0.042 points in price to bid 117.608, yielding 6.35 percent, according to Thomson Reuters data.

    The 2038 Par bond is trading up 0.15 points in price to bid 65.65, yielding 7.05 percent.

    You May Like

    Video Migrants Continue to Risk Lives Crossing US Border From Mexico

    In remote areas of the Sonoran Desert, which straddles the US-Mexico, thousands of migrants face arid desolation

    Video Recycling is Lifeline for Lebanon’s Last Glassblowers

    It's an ancient craft that stretches back millennia - but despite Lebanon’s trash crisis providing a lifeline, remaining glass blowers face an uncertain future

    Meet the Alleged Killer of Cambodia’s Kem Ley

    What little is known about former soldier, troublesome Buddhist monk and indebted gambler, raises more questions than answers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    London’s Financial Crown at Risk as Rivals Eye Brexit Opportunitiesi
    X
    VOA News
    July 25, 2016 5:09 PM
    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Calm the Waters: US Doubles Down Diplomatic Efforts in ASEAN Meetings

    The United States is redoubling diplomatic efforts and looking to upcoming regional meetings to calm the waters after an international tribunal invalidated the legal basis of Beijing's extensive claims in the South China Sea. VOA State Department correspondent Nike Ching has the story.
    Video

    Video Four Brother Goats Arrive in Brooklyn on a Mission

    While it's unusual to see farm animals in cities, it's become familiar for residents of Brooklyn, New York, to see a little herd of goats. Unlike gas-powered mowing equipment, goats remove invasive weeds quietly and without adding more pollution to the air. As Faiza Elmasry tells us, this is a pilot program and if it proves to be successful, the goat gardener program will be extended to other areas of New York. Faith Lapidus narrates.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.

    Special Report

    Adrift The Invisible African Diaspora

    More Americas News

    Video Migrants Continue to Risk Lives Crossing US Border From Mexico

    In remote areas of the Sonoran Desert, which straddles the US-Mexico, thousands of migrants face arid desolation

    Obama: Trump’s Portrait of America ‘Doesn’t Jibe With Reality’

    At news conference with Mexico's president, Obama says US is 'not going to make good decisions' about race relations, crime ' based on fears that don’t have basis in fact'

    Vatican Invited to Mediate in Venezuela Crisis

    Various opposition leaders say President Maduro's public exhortations to support dialogue are a cynical attempt to buy time and cling to power

    Homicides Rise 15.4 Percent in Mexico in 1st Half of 2016

    The figures remained below those for 2011, the peak year for violence during Mexico's drug war

    Video Wall Already Runs Along Parts of US-Mexico Border

    Large metal barrier that separates Nogales, Arizona, from Nogales, Sonora, isn't that popular with those who live near it

    Brazil Arrests Suspected Olympics Attack Planners

    Cell organized through internet-based messaging services such as WhatsApp and Telegraph