Vulture Fund Warns Argentina of Fresh Default and Seeks Immediate Talks

Holdout creditor Aurelius Capital Management has asked the Argentine government to engage in serious negotiations to avoid a fresh debt default, as its grace period runs out on 30 July.

On 11 July, representatives of the holdout creditors and the Argentine government met separately with a court-appointed mediator to discuss a settlement. However, the parties could not reach an agreement despite five hours of talks.

"If there is no agreement, the next sovereign debt crisis for Argentina will begin on July 30. There is still time to avoid that result, but only if the Argentine government starts serious negotiations with us immediately," Aurelius said in a statement.

"The Argentine officials refuse to meet with us or even to negotiate with us indirectly. Unfortunately, this focus plays with the means and future of the Argentine people."

The so-called "vulture fund" also criticised a fresh request by Argentina, asking US district judge Thomas Griesa to stay his order that would allow the country to pay bondholders and meet the 30 July deadline.

"On Friday, the Argentine Economic Ministry emitted a further declaration asking for the pari passu order to be suspended. This is strange, because the District Court rejected that suspension last month," Aurelius added.

Argentina has been engaged in a long legal battle with hedge funds led by Elliott Management and Aurelius, which refused to take part in the country's debt restructuring. About 92% of the country's creditors agreed to swap debts and accept less money.

In a major blow to the government, Griesa earlier gave a ruling that bars Argentina from paying the holders of its restructured debt unless it pays the hedge funds.

Following the adverse order from Griesa, Argentina claimed that if the country paid the suitors on their terms, it would lead to claims from other holdouts of around $15bn (£8.8bn, €11bn) in debt.

The government's coupon payment to restructured bondholders through a New York bank had earlier been blocked by Griesa. As a result, the country is facing a technical default by the end of July if it does not make a settlement with the "vulture funds".

Despite the bitter spat with them, Argentina will have to settle with the holdout funds as it has few alternatives to avert a default, which would damage its reputation further in the international capital market.