4. S&P PUTS ARGENTINA’S FOREIGN CURRENCY SOVEREIGN CREDIT RATINGS ON CREDITWATCH NEGATIVE (The Wall Street Journal Online)5. S&P PUTS ARGENTINA ‘CCC-/C’ FOREIGN CURRENCY RATINGS ON WATCH NEGATIVE (Dow Jones Institutional News)6. FITCH: ARGENTINA’S MISSED COUPON PAYMENTS RAISES POSSIBILITY OF DEFAULT (Dow Jones Institutional News)10. ARGENTINA ECONOMY: QUICK VIEW – ARGENTINA EDGES CLOSER TO DEFAULT (Economist Intelligence Unit – ViewsWire)By Ed StockerJuly 1, 2014It hasn’t been a good few days for Argentina’s government. First, a New York court ruled to block payments on its restructured debt, leaving the country teetering on the brink of its second default in 13 years. Then, in another judicial blow – this time from Buenos Aires – vice president Amado Boudou was formally charged in a corruption scandal.Boudou heard about the decision late on Friday evening when in Cuba. The charge is the culmination of an investigation into Ciccone, a printing company rescued from bankruptcy and awarded a government contract to produce pesos. The vice president, charged alongside five other defendants, is accused of using middlemen to gain a 70 per cent stake in return for favours.The bribery charge is particularly bad for the government, coming at a time when it is trying to hold the moral high ground over its restructured debt repayments. Buenos Aires has argued that it is willing to repay the debt, taking out adverts to this effect in the Financial Times, New York Times, Wall Street Journal and others.In the adverts, Argentina complained that having bonds issued under US jurisdiction “does not mean accepting court decisions that are impossible to comply with. All the more so if any such decision violates the sovereign immunity principle effective in the US.” In addition, it has sought to deflect the blame by attacking hedge funds – which President Cristina Fernández refers to as “vultures” – as agents bent on “extortion”.The ruling this week by Thomas Griesa, a US District Judge, makes it illegal for the country to proceed with $832m worth of payments on its restructured debt, without first settling with so-called holdout creditors who refused to take part in the restructuring. The country can still avoid a formal default by settling with holdout investors during a 30-day grace period.Whatever happens on the issue of debut repayment, the charges of corruption at the heart of the Fernández administration have undermined attempts to maintain a moral stance on the debt issue.Economist Martín Redrado was quoted as saying on the news portal Infobae that the ruling “affects the credibility of the country from the institutional point of view”. Meanwhile, the ex-president of the Central Bank, Javier Gonzalez Fraga, said on local radio that Boudou’s charge “fed Griesa’s vision that we’re corrupt because we don’t respect the law”.“The appeal [against vulture funds] has lost part of its attractiveness,” argued Claudio Iglesias, director of Economía y Sociedad public opinion consultancy. “How can a nation whose vice president is suspected of corruption give moral or other types of lessons to the world?”The president didn’t comment on Monday when inaugurating a new road project, maintaining the government’s silence. Cabinet chief Jorge Capitanich’s had earlier blamed press partiality – a common government scapegoat – while claiming he wasn’t a “criminal lawyer”.Boudou was once seen as an heir apparent. Fernández’s right-hand man during her re-election campaign in 2011, he was promoted as the Harley Davidson-riding, guitar-playing former economy minister who could connect with Argentina’s youth. But the decision now facing Fernandez is whether to stand by Boudou or cut him loose.What is clear is that the president is increasingly vulnerable on the home front, with the corruption charges swirling, inflation spiraling out of control and the country officially in recession. Such a confluence of domestic woes reduce her room to deflect criticism by citing external malevolence such as “vulture funds” or the territorial dispute with the UK over the Falkland/Malvinas islands.A poll released over the weekend by Poliarquía shows that 65 per cent of the Argentineans surveyed believed that the country should accept the US court decision and pay the debt, suggesting that people are tiring of the fighting talk.The poll also showed that only 38 per cent thought the handling of the external debt issue had been positive under Fernandez’s administration compared to 52 per cent during the previous government of Néstor Kirchner, the incumbent’s husband who died in 2010.“The Boudou case simplifies things for the opposition,” said Iglesias. “Before they didn’t know what to do regarding vulture funds because they didn’t want to be seen as unpatriotic. Questioning Boudou’s moral conduct is much more comfortable for them. It’s also easier for the average Argentinean to understand.”By Matthew Dalton2 July 2014The World Trade Organization ruled that import regulations imposed by Argentina violate international trade rules, European officials familiar with the decision said.The case was brought by the European Union, the U.S. and other countries and challenged what they say are protectionist policies by Argentina.1 July 2014BRUSSELS–The World Trade Organization has ruled that a swath of import regulations imposed by Argentina violate international trade rules, European officials familiar with the decision said.The case was brought by the European Union, the U.S. and other countries and challenged what they say are protectionist policies by the government of Argentine President Cristina Kirchner. The EU says Argentina enacted the regulations to try to bolster its industrial base and substitute imports with domestically made goods.The policies have drawn criticism from the world’s biggest developed economies, which in a statement two years ago called them “unbefitting any WTO member.”Since 2011, Argentina has required importers to obtain licenses from the government that aren’t automatically renewed for products ranging from cars to electronics. This is a complicated process that the EU contends discourages companies from buying foreign-made products. Importers have also been forced to preregister with the Argentine government since 2012.Argentina uses these procedures to scrutinize the foreign trading activities of importers and possibly pressure them not to import more than they export, the EU claims.A spokesman for the Argentine foreign ministry declined to comment.Mrs. Kirchner’s government has repeatedly clashed with foreign companies and investors. In 2012, it decided to nationalize YPF SA, a unit of the Spanish oil company Repsol, drawing protests from Spain and the EU. Last month, the U.S. Supreme Court refused to hear an appeal of a lower-court ruling that said Argentina must repay holdout creditors from its default in 2001.A confidential version of the WTO ruling was circulated last week to the parties in the dispute, a spokesman said, while declining to comment on the substance of the decision.The ruling by the Geneva-based arbiter of trade disputes could allow the EU, the U.S., Japan and others to retaliate against Argentina with export tariffs. But before that happens, Argentina must exhaust its appeals at the WTO, a process that could take years.4. S&P PUTS ARGENTINA’S FOREIGN CURRENCY SOVEREIGN CREDIT RATINGS ON CREDITWATCH NEGATIVE (The Wall Street Journal Online)By Josh Beckerman1 July 2014Argentina Had Missed a $539 Million Interest Payment on June 30Standard & Poor’s Ratings Services on Tuesday placed Argentina’s foreign currency sovereign credit ratings on CreditWatch with negative implications.The move reflects the ratings firm’s assessment that there is “at least a one-in-two probability” that a $539 million interest payment missed on Monday won’t be cured within the 30-day grace period.S&P said it would wait until the end of the grace period before resolving the CreditWatch status “because we see a sufficient chance that negotiations between Argentina and the holdout bondholders will conclude without Argentina defaulting under our criteria.”Argentina said Monday night that it will send a delegation to meet with a court-appointed lawyer on July 7 as it tries to resolve a dispute with a small group of creditors that could see the South American country default for a second time in 13 years.5. S&P PUTS ARGENTINA ‘CCC-/C’ FOREIGN CURRENCY RATINGS ON WATCH NEGATIVE (Dow Jones Institutional News)1 July 2014The following is a press release from Standard & Poor’s:OVERVIEW— On June 30, 2014, the Republic of Argentina missed a US$539 million interest payment on its discount bonds due in December 2033. Under the terms of the discount bonds, Argentina has a 30-day grace period following the scheduled interest payment date to make payment without defaulting. Standard & Poor’s does not rate the discount bonds.— The missed payment is the latest development arising out of Argentina’s 2005 and 2010 restructurings of its sovereign debt and the challenges to such restructurings by certain “holdout” bondholders.— We are placing our ‘CCC-/C’ long- and short-term foreign currency sovereign credit ratings on Argentina on CreditWatch with negative implications, reflecting our assessment that there is at least a one-in-two probability that the missed payment will not be cured within the grace period.— We will lower our foreign currency sovereign credit ratings on Argentina to selective default (‘SD’) if it fails to pay the delinquent interest on the discount bonds within the grace period or if it undertakes a debt exchange that would amount to a “distressed exchange” under our criteria.RATING ACTIONOn July 1, 2014, Standard & Poor’s Ratings Services placed its ‘CCC-/C’ unsolicited long- and short-term foreign currency sovereign credit ratings on the Republic of Argentina on CreditWatch with negative implications. At the same time, we affirmed our ‘CCC+/C’ long- and short-term local currency sovereign credit ratings and ‘raBB+’ national scale rating on Argentina. The outlook on the long-term local currency rating remains negative. In addition, the transfer and convertibility (T&C) assessment remains ‘CCC-‘.RATIONALEThe CreditWatch placement reflects our view of at least a one-in-two probability that Argentina will not pay the outstanding US$539 million interest payment on the discount bonds within the 30-day grace period allowed thereunder. According to our criteria (see “Timeliness Of Payments: Grace Periods, Guarantees, And Use Of ‘D’ And ‘SD’ Ratings,” published Oct. 24,2013), we may wait until the end of a grace period following a payment default if such grace period is 30 days or less and if we believe that the missed payment may be cured. In Argentina’s case, although we believe that there is a greater than one-in-two chance that the delinquent payment will not be made during the grace period–or the payment will be made as a “distressed exchange” under our criteria–we have nevertheless decided to wait until the expiry of the grace period before resolving the CreditWatch because we see a sufficient chance that negotiations between Argentina and the holdout bondholders will conclude without Argentina defaulting under our criteria.In 2005 and 2010, Argentina restructured several hundred of its defaulted sovereign obligations (original obligations) through a “debt exchange” (for a description of the events leading to the restructurings, see “Argentina Long-Term Ratings Lowered to Selective Default,” published Nov. 6, 2001). The bonds issued in exchange for the original obligations had, on average, a parvalue of less than half of the par value of the original obligations and included par bonds, quasi-par bonds, GDP-linked securities, and discount bonds due in December 2033 (discount bonds). During these two offers, 92.4% of the eligible debt was exchanged. Argentina indicated that on completion of the debt exchange, it would no longer honor untendered original obligations.Some of the original obligations were governed by New York law. Certain distressed debt funds and other investors acquiring sizable positions in the original obligations did not participate in the debt exchange and sued Argentina in the U.S. District Court in Manhattan, demanding payment under the terms of the original obligations. In 2013, the District Court agreed with these holders and ordered Argentina to pay all amounts due under the terms of the unexchanged original obligations. Argentina then offered similar terms to the ones provided in 2005 and 2010, but the holders of the defaulted debt rejected that offer.On June 26, 2014, Argentina paid the Bank of New York Mellon (BoNY), as trustee for the discount bonds, $539 million in respect of an interest payment due thereon on June 30, 2014. On June 27, holders of unexchanged original obligations asked the District Court to enforce a previous court decision to block the interest payment to holders of the discount bonds until the holders of the unexchanged original obligations received the amounts due to them. Instead, the District Court ordered BoNY to return the funds to Argentina. We understand that Argentina and original obligation bondholders may be in negotiation.The affirmation of the ‘CCC+/C’ local currency ratings reflects our view that the potential disruptions to payments on Argentina’s external debt are not likely to further erode its ability to service debt issued in local currency under local law. We also maintained our ‘CCC-‘ T&C assessment for Argentina as we believe it already reflects the risk that the government could further tighten its exchange control laws and policies to the extent that they impair the ability of the private sector to gain access to foreign currency to service its debt.We also think that Argentina will maintain timely payment to its multilateral creditors, as it has done in the past.CREDITWATCHIf Argentina can reach an agreement with its holdout creditors and service its external debt within the grace period, we could remove the ratings from CreditWatch.Absent a payment cure, we would likely lower our foreign currency sovereign credit ratings on Argentina to selective default (‘SD’).If and when Argentina resolves its issues with the holdout creditors and holders of the discount bonds–either before or after we assign a ‘SD’ rating for the June 30 missed payments–we could raise our ratings on Argentina, potentially to the high ‘CCC’ or low ‘B’ categories. This future assessment would depend on our appraisal of residual litigation risk, Argentina’s access to international debt markets, and, more broadly, its credit profile at that time.KEY STATISTICSRELATED CRITERIA AND RESEARCHRelated Criteria— Timeliness Of Payments: Grace Periods, Guarantees, And Use Of ‘D’ And ‘SD’ Ratings, Oct. 24, 2013— Sovereign Government Rating Methodology And Assumptions, June 24, 2013— Methodology For Linking Short-Term And Long-Term Ratings For Corporate, Insurance, And Sovereign Issuers, May 7, 2013— Criteria For Assigning ‘CCC+’, ‘CCC’, ‘CCC-‘, And ‘CC’ Ratings, Oct. 1, 2012— Criteria For Determining Transfer And Convertibility Assessments, May 18, 2009— Rating Implications Of Exchange Offers And Similar Restructurings, Update, May 12, 2009— Understanding National Rating Scales, April 14, 2005Related Research— Inter-American Development Bank Ratings Affirmed At ‘AAA/A-1+'; Outlook Remains Stable, June 30, 2014— The Republic Of Argentina Long-Term Foreign Currency Rating Lowered To ‘CCC-‘ From ‘CCC+'; Outlook Is Negative, June 17, 2014— Sovereign Defaults And Rating Transition Data, 2013 Update, April 18, 2014— Distressed Sovereign Debt Exchanges: Examples From The Past And Lessons For The Future, June 28, 2011— Argentina (Republic of), Jan. 11, 2002In accordance with our relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable (see ‘Related Criteria And Research’). At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision.After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook.RATINGS LISTRatings Affirmed; CreditWatch ActionTo FromArgentina (Republic of) (Unsolicited Ratings)Sovereign Credit RatingForeign Currency CCC-/Watch Neg/C CCC-/Negative/CRatings AffirmedArgentina (Republic of) (Unsolicited Ratings)Sovereign Credit RatingLocal Currency CCC+/Negative/CArgentina National Scale raBB+/Negative/–Transfer & Convertibility Assessment CCC-This unsolicited rating(s) was initiated by Standard & Poor’s. It may be based solely on publicly available information and may or may not involve the participation of the issuer. Standard & Poor’s has used information from sources believed to be reliable based on standards established in our Credit Ratings Information and Data Policy but does not guarantee the accuracy, adequacy, or completeness of any information used.6. FITCH: ARGENTINA’S MISSED COUPON PAYMENTS RAISES POSSIBILITY OF DEFAULT (Dow Jones Institutional News)1 July 2014The following is a press release from Fitch Ratings:Fitch Ratings-New York-01 July 2014: Argentina’s entry into the grace period related to its coupon payments on foreign law exchanged securities, due on June 30, raises the specter of a possible default, according to Fitch Ratings.The grace period for these securities ends on July 30, 2014. Fitch currently rates Argentina’s Foreign Currency IDR ‘CC’, which already incorporates a very high default risk. In addition, Fitch understands that coupon payments of exchanged bonds issued under local law that were also due on June 30 (Discount bonds denominated in USD and ARS) were made in a timely manner and without interruption. Fitch currently rates Argentina’s local law bonds ‘B-‘.The legal process related to the dispute between Argentina and certain holdout creditors that did not participate in the 2005 and 2010 exchange offers culminated with the denial of Argentina’s cert petition to the U.S. Supreme Court. As such, the U.S. Lower Court ruling holds, and prohibits Argentina from making payments to exchanged bond holders unless payments are also made to plaintiffs in the case.Fitch recognizes that negotiations could occur between the government of Argentina and holdout creditors, although the success and timing of such a process is difficult to predict. Fitch will continue to monitor developments in the coming weeks.Absent a negotiated settlement with the holdouts or a reinstatement of a stay order allowing Argentina to continue servicing its exchanged bond debt, there is a high risk that Argentina will not make the overdue coupon payment at the end of the grace period. In such a scenario, Fitch would downgrade Argentina’s FC IDR to ‘RD’ (Restricted Default) and the bond ratings of the affected securities to ‘D’ (Default). Moreover, Argentina’s Local Currency rating of ‘B-‘ with a Negative Outlook could also face downward pressure in this scenario.On the other hand, a successful agreement with holdout creditors that settles this case definitively and reduces the risk of interruption in payments to exchanged bond holders would be credit positive.By Charles Newbery1 July 2014Plans Underway to Begin Talks With Holdouts July 7BUENOS AIRES (MNI) – The government said Tuesday it is considering changing banks to pay creditors holding restructured bonds from a $100 billion default in 2001, as it plans talks this week to avert a second default amid a court battle with bondholders who refused to participate in the restructurings.The possibility of switching banks “is part of the analysis,” Cabinet Chief Jorge Capitanich said in a televised press conference.This would involve changing the paying agent for the restructured bonds to possibly Banco Nacion, the largest state bank, as the government is trying to figure out how to pay the 92.4% of bondholders who accepted 30 cents on the dollar in restructuring agreements in 2005 and 2010.The latest payment was due Monday, and the government Friday tried to wire $539 million to the Bank of New York Mellon, the paying agent for the restructured bonds, to make a $539 million payment as part of a total of more than $1 billion due.But U.S. federal judge Thomas Griesa, who has been presiding over the holdouts case, said the payment would be “illegal” because it would violate his order to pay $1.5 billion owed to the plaintiff creditors, among them a hedge fund of American billionaire Paul Singer.These holdouts won a lengthy case based on an equal treatment clause in the bond contracts, meaning the country must pay the plaintiffs at the same time it makes its next payment to the holders of restructured bonds.Argentina still has a 30-day grace period, until July 30 to make the payments, without being considered in default.The Economy Ministry announced Monday night it would send a team of negotiators to New York July 7 to launch talks with an attorney appointed by Griesa to mediate. Capitanich, who forms part of an inner circle advising President Cristina Fernandez de Kirchner on the debt situation, said the team will be announced later this week.But the solution is not obvious.Gaston Rossi, an economist at LCG in Buenos Aires, said, “The government will look at as many alternatives as it can to resolve this issue and keep out of default.”He said alternatives could be to negotiate a repayment in bonds with the plaintiffs starting in 2015, when a rights upon future offers clause expires. This clause, which expires Dec. 31, allows restructured bondholders to collect anything that is paid to other creditors over the 30 cents on the dollar they received. The government has said could saddle the country with up to $120 billion in additional debt payments.Rossi said a second alternative is to negotiate with a third party to buy the $1.5 billion in debts from the plaintiffs and negotiate a repayment after 2015.This has happened in the past. For example, Blue Ridge Capital, a New York-based hedge fund, bought the rights to collect a sentence in favor of a company that sued Argentina in a World Court tribunal for changing its contract for natural gas transmission rates.“But it doesn’t have much time to structure such a deal by the end of the month,” Rossi said, “It is not easy to do anything when you have a pistol to your head.”Federico MacDougall, an economist at the University of Belgrano, said negotiating a solution with the plaintiffs is the most viable alternative as long as it does not trigger the rights-upon-future-offers clause, or RUFO. This can be structured with a cash and bond payment after the clause expires.“The government cannot do anything that would trigger the RUFO or that would push the country to a technical bankruptcy,” he said.By Melvin Backman1 July 2014Argentina will meet July 7 with its hold-out hedge fund creditors in a last ditch attempt to work something out and avoid default.NEW YORK (CNNMoney) — Argentina, the Land of Silver, may just avoid further tarnishing.The nation is on the verge of another default, but Argentine officials plan to meet July 7 with a group of creditors — mostly hedge funds — to try to work something out.The South American country’s last lapse in payment came in 2001 on $100 billion in debt. It managed over the years to get most of its creditors to take discounted “exchange” bonds at a lesser value, but a small group of “holdout” creditors led by hedge funds NML Capital and Aurelius Capital Management demanded full payment.Argentina largely ignored them until the U.S. Supreme Court said ruled on June that everyone had to get paid.The country wants to keeping paying interest to the exchange group and continue rebuilding its bond market credibility, but it can’t do so until it works out a deal with the holdouts. The so-called holdouts were supposed to get $900 million on Monday, but a U.S. judge forbid Argentina from paying one group of creditors and not another.At the moment, Argentina has a 30-day grace period to sort its problems out with its bondholders.“Argentina reiterates its call to negotiate on fair, equitable and legal conditions that consider the interests of 100% of creditors, which means that it allows timely charge restructured bondholders to be paid in due course,” the country’s Ministry of the Economy and Public Finance said in a statement.Jay Newman, a senior portfolio manager at NML parent Elliott Management, was skeptical. After all, two days of talks last week failed to produce an agreement.“There are no negotiations underway, there have been no negotiations, and Argentina refuses to commit to negotiations in the future,” he said in a statement earlier Monday. “Argentina’s government has chosen to put the country on the brink of default. We sincerely hope it reconsiders this dead-end path.”By Daniel Bases and Sarah Marsh1 July 2014NEW YORK/BUENOS AIRES, July 1 (Reuters) – Argentina’s past deals to settle claims with Spanish oil major Repsol SA and the Paris Club of creditor nations could serve as examples of how to negotiate a settlement to a decade-old debt dispute, one of the lead holdout bondholders said on Tuesday.Argentina faces a potential default unless it reaches a deal with holdout investors by July 30 when it must make a payment on its restructured sovereign debt. The holdouts rejected previous restructuring deals Argentina offered after it defaulted on about $100 billion in 2001-2002.Standard & Poor’s rating agency placed Argentina’s ‘CCC-/C’ unsolicited long- and short-term foreign currency ratings on “CreditWatch” with negative implications on Tuesday, citing likelihood of a default in interest payments.Jay Newman, senior portfolio manager at Elliott Management, one of the lead holdouts in the sovereign debt dispute with Argentina, told CNBC TV Argentina’s deal with the Paris Club was “important and illustrative” for a possible agreement.“Argentina recognized after also about the same amount of time we have been dealing with our claims, recognized the total claim of the Paris Club, principal, interest, and penalties,” Newman said.However, Argentina awarded Repsol only 50 percent of what it had originally demanded for Argentina’s seizure of its YPF subsidiary.Argentina was ordered by U.S. District Court Judge Thomas Griesa in New York in 2012 to pay the holdouts, led by Elliott Management Corp and Aurelius Capital Management, $1.33 billion plus accrued interest.Argentina must pay holdouts at the same time it pays investors who accepted swaps in 2005 and 2010. Griesa’s ruling was upheld on appeal and denied a hearing by the U.S. Supreme Court, effectively exhausting Argentina’s U.S. legal recourse.A deal with the holdouts would be the final element in a campaign by the government to clear up its arrears and allow it to re-enter the international capital markets for desperately needed cash to help fund development, especially the massive Vaca Muerta shale oil and gas field in Patagonia.The Argentine economy ministry, which said on Monday it would send a delegation to New York next week to meet with a court-appointed mediator, said late on Tuesday the holdouts had asked Griesa in writing to ensure its payments on restructured debt did not reach exchange bondholders.This was proof, the ministry said in a statement, that the holdouts did not want to “reach a just, equitable and legal solution that respects the interests of 100 percent of creditors.”DEALMAKEREconomy Minister Axel Kicillof’s deal in February with Repsol ended a two-year dispute and led to the Argentine government issuing $5 billion worth of bonds in compensation.Those bonds are governed by Argentine law, putting them out of the reach of U.S. courts, and were later sold by JPMorgan with the cash going to Repsol.Kicillof also settled arrears of nearly $10 billion with the Paris Club by agreeing to make payments in cash installments.Paris Club rules forbid any reduction in the value of the country’s debt without a program under the auspices of the International Monetary Fund, something Argentina would not accept.On Monday, Newman complained Argentina had not met with him or the other holdouts. Argentina announced the delegation’s trip to New York several hours later although it has not said if the team would meet face-to-face with the holdouts and has not named its members.In a statement issued on Tuesday, Mark Brodsky, chairman of Aurelius Capital Management, voiced skepticism.“I predict Argentina will not send a delegation … next week, or will send one without any authority to depart from the prior exchange offer terms. Either way, Argentina’s government seems determined to plunge the country into a completely avoidable crisis on July 30,” Brodsky said.Argentina says it cannot voluntarily offer better terms for a restructuring with holdouts because of a provision called the Rights upon Future Offers (RUFO), which expires on Dec. 31. It is designed to stop anyone getting a better deal than the exchange bondholders.Last week Argentina defied Griesa and made a scheduled coupon payment of $539 million due June 30 (with a 30-day grace period) on restructured bonds, saying it was bound by Argentine law to make the payment.The money was deposited in the Bank of New York Mellon’s account at the Central Bank of Argentina without making the court-ordered payment to holdout investors at the same time. Griesa said the deposit was illegal and the money should “simply” be returned to the government.That deposit, made up roughly of $232 million and 225 million euros ($308 million), has not moved from the account because no formal order has been issued by Griesa to return it to the government, sources familiar with the situation said. The sources spoke on condition of anonymity given the unsettled legal matter. One said: “This is a fairly unique situation.”10. ARGENTINA ECONOMY: QUICK VIEW – ARGENTINA EDGES CLOSER TO DEFAULT (Economist Intelligence Unit – ViewsWire)1 July 2014EventConstrained by a US court ruling that forces it to repay litigant holdout creditors (who did not participate in 2005 or 2010 restructurings) when it makes payments to current creditors, and in the absence of a negotiated repayment deal with the holdouts, Argentina failed on June 30th to meet a coupon payment to holders of restructured bonds issued under New York law.AnalysisIt had become increasingly evident in the days leading up to the June 30th deadline that the payment would not be made. Argentina had transferred the necessary funds to its payments agent in the US, Bank of New York Mellon, during the previous week, asserting that it had therefore met its obligations. However, it was always clear, under the terms of the US court ruling, that the bank would not be able to transfer the funds to the intended creditors without some sort of provision for repayment of the holdouts. In the event, New York judge Thomas Griesa froze the funds, criticised Argentina for attempting to evade compliance with his original ruling and again called on the government to begin negotiations on a repayment plan.The missed payment is not in itself a major credit event. The major ratings agencies could now downgrade Argentina’s credit rating to “selective default”, but the government still has a 30-day grace period to make its coupon payment before it enters into full-blown default. This does not mean that the dispute has not affected the economy. In fact, sentiment is extremely weak, there has been renewed pressure on the black-market exchange rate, and credit, investment and jobs growth are likely to have all but frozen.In this already difficult context, a full-blown default on July 30th would in all likelihood prompt a major devaluation and a much deeper recession than we are currently forecasting, putting the political transition at risk. Given these consequences, there is a good chance of a deal with the holdouts. Obstacles remain, however, including clauses in the restructured bonds that allow these creditors to renegotiate if Argentina voluntarily offers other creditors a better deal. Argentina’s aggressive stance in negotiations to date may well be related to a desire to demonstrate that any deal will not be “voluntary”.By Nicole Hong1 July 2014Remember the interest payment Argentina had to pay on Monday? That cash is sitting in limbo right now.Last Thursday, Argentina tried to get around a U.S. court order by depositing approximately $539 million with Bank of New York Mellon Corp., the amount needed for an interest payment due to its restructured bondholders on Monday. The day after Argentina deposited the cash, a U.S. District Court judge told BNY Mellon to return the money to Argentina, warning that anyone who attempted to make the payment would be in contempt of court.The money has not yet been returned to Argentina and is still sitting in BNY Mellon’s account, according to two people familiar with the matter. The bank is waiting for a formal court order to send the money back, the people said.On Monday, BNY Mellon sent a letter to Argentina’s restructured bondholders, explaining why they weren’t getting their interest payments. BNY Mellon has been the so-called “indenture trustee” for Argentina since 2005, meaning it sends payments from Argentina to the country’s restructured bondholders.U.S. courts have ruled that Argentina is not allowed to pay its restructured bondholders unless it also pays its holdout creditors, which it has not done.One group of bondholders is particularly upset about all this: the euro bondholders. Of the $539 million due to restructured bondholders on Monday, approximately $308 million were intended for holders of Argentina’s bonds denominated in euros. Lawyers representing euro bondholders have asked the judge to clarify the scope of his ruling, arguing that euro bonds shouldn’t be affected by the ruling because the euro payments never flow through a U.S. bank and are governed by English law, not New York law.By Andreas Campomar2 July 2014SÃO PAULO, Brazil — Tens of thousands of soccer fans came from all parts of Argentina. It does not matter that there were no tickets left for the match. This seemed an irrelevance. The main thing was to have been here, and to have witnessed Argentina take on Switzerland.In a sliver of park overshadowed by the modern office buildings of downtown São Paulo, FIFA has installed large screens for those without tickets. The fans know that tickets were going for between $2,000 and $3,000. Not that there were any for sale. Those who had come from the Arena Corinthians complain that there are only buyers and no sellers.Even two hours before the match started, the Argentines appeared en masse with their flags of light blue and white. The striped albiceleste shirts are ubiquitous; even children in strollers were wearing them.The drinking started early. One fan, while being frisked at the turnstile, shouted: ”Today, we’re all brothers. Boca-River, it doesn’t matter.” He was referring to the rival clubs River Plate and Boca Juniors.The Argentines came here with a spring in their step, despite the long journey. Victory on Tuesday against Switzerland — a country perceived to be without a soccer pedigree — was assumed. Now, with only Belgium to beat, Argentina’s path to the semifinals seemed assured.Between the waves of the blue-and-white-striped shirts, a handful of Switzerland supporters were singled out as exotic creatures worth having their picture taken. The Swiss were realistic but hopeful. ”Germany wa nearly beaten yesterday, so there’s a small chance we might win,” said Lukas Schuler of Zurich. ”I would have gone to the match, but the Argentines have bought all the tickets.”The Argentines were all smiles. Brazil seems to bring out the best in the visiting fans. For many it was as much about the soccer — though they were here to see Argentina win — as about friendship.Diego Nazar-Dobson, Mariano Rosas and Andrés Rodríguez made the trip from Mendoza, Argentina. ”This is about fun, about friends going off on a trip together,” Nazar-Dobson said. ”The Brazilians have been very welcoming. We’re a soccer-mad country, so are they. And they do have the best soccer in the world.”For Fernando Giménez, a Deportivo Morón fan from the Hurlingham section of Buenos Aires, the trip has taken him 40 hours by car. ”I could have watched the match relaxed at home,” he said, ”but it is the passion of the game that has brought me here.”There are soccer colors on show from Colombia, Uruguay, Peru, Mexico and even Venezuela. This World Cup has become a tournament not just for Brazil but also for all South Americans. Not since the 1978 World Cup was played in Argentina has geographical proximity allowed average fans the opportunity to travel.As Pelé’s smiling face was caught on camera, the whistles and boos rang out. There is only one god allowed, and it is Diego Maradona and his No. 10 shirt.For all the violence inherent in Argentine soccer — not least the barbarities that ensue between rival clubs — it was peaceful here. Marcelo Chumacero, a River Plate supporter, was surrounded by Boca fans. ”We’re all Argentines here, there’s nothing to worry about.” He stops himself. ”But at home of course not.”The game was not watched with the usual rowdiness, but in a studied fashion. With the match scoreless at halftime, the Argentines were unusually quiet. Rather than berate their own, the supporters criticized the defensiveness of the Swiss. Messi had not been allowed to play. The beer continued to flow. A news team was trying to get the attention of a person with the map of the Falkland Islands on his back. There were two Argentine flags underneath.As the soccer spectacle drained out of the match at the end of the second half, reality intruded. Seven Brazilian youths are lined up against a partition by the police and searched. Some spectators turned from the giant screen to take photographs.In the dying minutes of the match, di María scored to take Argentina through. A fan fell to his knees and kissed his blue and white bag. The Argentines who had been quiet began to chant. Shirts swung in the late afternoon sun. For those who have spent two days in their cars, it was a relief. The match nearly offered a final twist with a Swiss free kick just outside the Argentine penalty area. The whistle blew and the crowd roared.”I drove through the night,” said a fan from Santa Fé, Argentina. ”I haven’t slept since yesterday. But it was worth it.”By Charlie DevereuxJuly 1, 2014Argentina’s President Cristina Fernandez de Kirchner has less than a month to choose between two unpalatable options: fulfilling a vow never to pay off creditor hedge funds, or negotiating with them to avoid a rerun of the 2001 debt crisis that forced a predecessor to flee the presidential palace in a helicopter.With the economy contracting and foreign currency reserves near an eight-year low, she is likely to decide that a deal to pay off the $1.5 billion the funds are demanding is the least bad choice, said Claudio Loser, the head of research firm Centennial Group Latin America.“A catastrophic situation in the economy would be worse” for Fernandez than any backtracking on her promises, Loser, a former International Monetary Fund director, said by phone from Washington. The government “is very fearful that they could be kicked out or the last year of their term is a disaster.”Fernandez has already moved to regain access to global credit markets for the first time since the 2001 default. Since October, she has settled arbitration cases at the World Bank, paid Spanish oil company Repsol SA for the expropriation of YPF SA and negotiated with the Paris Club of creditor nations. Now she must go the final yard and negotiate with hedge funds she calls “vultures,” Loser said.A failure to reach an accord would drain reserves that have tumbled 21 percent in the past year to $29 billion. Success would allow Fernandez to resume borrowing and spending as the fiscal deficit widens to about 6 percent of gross domestic product, or $21 billion, this year, said Dante Sica, director of Buenos Aires-based consulting firm Abeceb.com.Freedom MarginWhile the economic consequences of defaulting wouldn’t bring an economic crisis as severe as the one in 2001, they would bring further pressure on the peso and reserves, said Mauro Roca, a senior Latin America economist at Goldman Sachs Group Inc.“It would give the government less margin of freedom in their domestic agenda which is pretty complicated,” Roca said in a phone interview from New York.Economy Ministry spokeswoman Jesica Rey didn’t reply to a voice message and e-mail seeking comment about the possible consequences of not reaching an agreement with the holdouts.U.S. District Court Judge Thomas Griesa last month blocked Argentina from paying interest on its bonds unless it also pays holdouts from two bond restructurings, led by billionaire Paul Singer’s NML Capital. That meant Argentina missed an interest payment on June 30, leaving it with 30 days to reach an accord or default for the second time in 13 years.2001 CrisisThe government said June 30 that it will send a delegation July 7 to New York to meet with court-appointed mediator Daniel Pollack.The litigation dates back to 2001 when former President Fernando De la Rua restricted cash withdrawals from banks to avoid a collapse of the financial system, sparking riots that left dozens dead. De la Rua resigned and was airlifted out of the presidential palace to avoid protesters. A week later, Argentina announced it would default on $95 billion of debt.Fernandez’s husband and predecessor, Nestor Kirchner, took power in 2003 and negotiated a restructuring two years later in which investors accepted a 70 percent reduction. With a second round in 2010, Argentina was able to restructure 92 percent of the debt.Fernandez described last month’s court ruling as “extortion,” and warned that it would open the country to as much as $15 billion in claims from other holdouts on June 16. Four days later said she would negotiate as long as it is under conditions that respect the country’s constitution.“We are ready to carry out our duties,” Fernandez said June 20.Hands TiedThe government has its hands tied, said Diego Giacomini, an economist at Buenos Aires-based Economia y Regiones.Not abiding by the court ruling would force Argentina into a default that would stoke inflation estimated at 40 percent, drive away investment and cause an already contracting economy to shrink further, he said.The country needs between $13 billion and $17 billion in credit “to get to the end of 2015 without losing too many reserves and without having to devalue the currency too significantly,” Giacomini said in a phone interview.IMF ‘Dictatorship’Nestor Kirchner, who died in 2010, blamed the IMF “dictatorship” for supporting a fixed exchange rate and enforcing spending cuts that led the country into the 2001 economic crisis. Now, his wife is seeking to repair relations with the Washington-based lender. The government this year overhauled its consumer price and gross domestic product indexes after the IMF censured Argentina for misreporting its economic data.Argentina has also settled about $500 million of debt with five companies that had won rulings at the World Bank’s arbitration court, compensated Repsol and agreed to pay the Paris Club of creditors $9.7 billion of defaulted debt.Negotiating with the holdouts is “the last conflict left to resolve to regain access to international markets,” Sica said. “Financing allows you to kick the can down the road.”While the $15 billion it still owes holdouts is more than half of reserves, Argentina has the capacity to pay if Fernandez is allowed to pay in bonds, Roca said.Standing FirmFernandez called on her supporters last month to unify in their fight against the hedge funds.“One of the things we won’t negotiate on is to hand over this country to vultures that want to tear it to pieces,” Fernandez said last month.Former Economy Minister Hernan Lorenzino said in October 2012 that the government wouldn’t settle with the holdouts.“We’ll never pay the vulture funds,” Lorenzino posted on his Twitter account. “Whoever thinks otherwise hasn’t understood a thing.”With debt payments looming, the budget deficit widening and reserves shrinking, the time has come to backtrack, said Manuel Mora y Araujo, a Buenos Aires-based political analyst. Negotiating with the funds is preferable to the prospect of having the country’s foreign assets seized following a default, he said.It would not the first time that Fernandez has been forced to backtrack. After vowing never to devalue, Fernandez allowed the peso to tumble 19 percent against the dollar in January, the most since Argentina abandoned the one-to-one peg with the U.S. dollar in the wake of the 2001 default.Protests over week-long blackouts and a wave of looting following police strikes for higher wages in December were a reminder for Fernandez of how quickly control can unravel in Argentina.“They have no choice,” Loser said. “They could say they’re not paying but the consequences would be very, very bad. Fernandez doesn’t want to go out like De La Rua.”By Camila Russo and Katia PorzecanskiJuly 1, 2014Argentine bonds rallied, snapping a three-day losing streak, after the government set a date to begin talks with a court-appointed mediator in its conflict with holdout creditors that threatens to cause a default.Government bonds due 2033 rose 2.2 cents to 85.40 cents on the dollar at 10:34 a.m. in Buenos Aires, pushing the yield down 0.34 percentage point to 10.24 percent, according to data compiled by Bloomberg. The extra yield investors demand to hold Argentine debt over U.S. Treasuries narrowed 0.31 percentage point, the most in emerging markets, to 6.93 percentage points, according to JPMorgan Chase & Co.’s EMBIG index.Since President Cristina Fernandez de Kirchner said June 20 she would seek a negotiated solution to the conflict with creditors holding defaulted bonds from the nation’s 2001 economic crisis, her government published advertisements in the New York Times and Financial Times vilifying a U.S. judge for his ruling that blocked the nation from making a $539 million payment on the 2033 debt. The Economy Ministry said late yesterday it will send a delegation to meet with the mediator Daniel Pollack, known as the Special Master, on July 7, hours after holdouts NML Capital Ltd. said no talks had begun.“The government’s public strategy remains confrontational at times, but we think that much of this is driven by political concerns and attempts to improve its negotiating position,” Casey Reckman, an economist at Credit Suisse Group AG wrote in a note today. “Meeting with the Special Master is an important step in the rational direction.”Facing a U.S. court order that prohibits it from servicing current bonds until defaulted debtholders are paid, Argentina has to reach a deal by July 30, the date that the grace period on the interest payment expires.Argentine Delegation“The Economy Ministry has designated a delegation to meet with the official on July 7,” according to the statement. “Argentina reiterates its willingness to negotiate in fair, equal and legal conditions that contemplate the interests of all creditors which means allowing restructured bondholders to receive their due payment.”A clause in Argentina’s restructured bonds, which expires Dec. 31, prevents the nation from voluntarily making a better offer to holdouts without making the same offer to exchange bondholders.Elliott Management Corp., the hedge fund controlled by billionaire Paul Singer that is leading litigation for a group of holdouts through its NML unit, said yesterday Argentina’s assertion that it’s willing to negotiate is a “broken promise.”Default ProtectionLast week the Fernandez administration deposited $539 million to make a June 30 interest payment on bonds that were issued in restructurings following the country’s 2001 default. U.S. District Court Judge Thomas Griesa the next day called the move “illegal’ and a ‘‘disruption’’ to talks. He blocked the payment and urged the parties to reach a settlement.Aurelius Capital Management LP, which is also demanding payment for defaulted bonds, said in a statement that the country ‘‘refuses even to meet.’’Jesica Rey, an Economy Ministry spokeswoman, didn’t respond to an e-mail seeking comment.It costs $3.7 million in advance and $500,000 a year to insure $10 million of debt against default for five years with credit default swaps, according to CMA. That’s the highest in the world.Argentina has $28.7 billion of international dollar bonds outstanding.‘Ranting, Raving’‘‘They’re obviously trying to make as much noise as possible,” said Julian Adams, who manages $75 million in emerging-market bonds, including Argentina’s 2033 bonds, at Adelante Asset Management Ltd. in London. “If they are realistic about it they can reach a deal. If they carry on ranting and raving and ignoring U.S. law, which is what they have been doing for the past couple of days, they will get nowhere.”The case stems from the country’s 2001 default on a record $95 billion. While Argentina was able to restructure 92 percent of the debt in 2005 and 2010, the rest of creditors refused to take losses of about 70 percent, a restructuring that Fernandez calls the harshest for sovereign creditors in history.The U.S. Supreme Court on June 16 left intact a lower court ruling that Argentina can’t make payments on the restructured bonds without also paying $1.5 billion to holders of the defaulted bonds. Argentina says if it complies with the ruling, it would be subject to $15 billion of similar claims, or more than half of the nation’s international reserves.Economy Minister Axel Kicillof at one point said the country was studying plans to skirt the ruling with a debt swap into local law instead of New York law.Creditor SettlementsSince October, Argentina has settled claims with five companies in the World Bank’s arbitration arm, reached an agreement with the Paris Club group of creditor nations and compensated Spanish oil producer Repsol SA for the takeover of YPF SA. Those moves aimed to burnish the country’s standing with global capital markets. Argentina also improved its economic data reporting after being censured by the International Monetary Fund.A settlement with holdout creditors would be the last major obstacle to accessing international financing.NML said June 24 that if there’s “good progress” in the talks, it may support a way for Argentina to pay the bonds by July 30. Pollack, the special master, said last week there had been no progress.Edwin Gutierrez, who helps oversee $13 billion at Aberdeen Asset Management Plc, including Argentine bonds, said the government and holdouts probably will reach a deal as the end of the grace period draws near.“This gets resolved but it gets resolved on July 30, and anyone who expected this to happen tomorrow or yesterday were being naive,” Gutierrez said in a telephone interview from London. “They’ll have to pay Elliott. There’s no way around it.”By Agustino FontevecchiaJuly 1, 2014The Argentine government and Elliott Management, the hedge fund run by billionaire Paul Singer, are playing a deadly game of poker where both sides are vying for an upper hand. In a court battle that has lasted over ten years, the so-called vulture funds have the advantage of several court decisions in their favor, while the administration of President Cristina Kirchner can rely on the nuclear option, a threat of default, to extract concessions. In reality, both sides have been dealt a weak hand and are looking to bluff their way out of it. Ultimately, the best both of them can hope for is for the other to act rationally to arrive at a compromise that is truly mutually beneficial.“Default will be the dead end,” said Jay Newman, senior portfolio manager at Elliott Management, on Tuesday in a television interview with CNBC. The soft spoken hedge funder reiterated their position once again: we are willing to negotiate with the Argentine government, but not on your terms. Elliott has led the charge, along with Auerlius Capital and Blue Angels, against the South American nation over one of history’s largest ever sovereign debt restructurings.After a massive default toward the end of 2001 that some put around $100 billion, Buenos Aires unilaterally offered defaulted creditors a new bond that included a 70% haircut. In their two offers, in 2005 and 2010, they managed to get more than 92% on board. Elliott Management, which the Argentine government accuses of buying their bonds at a deep discount (paying $48.7 million for bonds worth $832 million at face value, or 6 cents on the dollar if you believe the figures), decided to fight in court.With rulings from Judge Griesa, the Second Circuit Court, and the refusal from the Supreme Court to take the case, Elliott effectively won that battle. They are to be paid in full, which comes out to about $1.3 billion when all the other plaintiffs are added up, before exchange bondholders can receive payment.In reality, things are fuzzier. The reason Elliott hasn’t really won is that it is impossible for Argentina to pay them in full, as that would move the remaining holdouts to litigate, and probably get judgments, against Argentina. The claims would rise to about $15 billion, Finance Minister Axel Kicillof argued, and that would unravel the whole restructuring, with claims reaching $120 billion if his figures are to be believed.But Elliott has won in that Argentina’s government, which has systematically refused to negotiate, has been forced to the discussion table. After sending mixed messages over the past two weeks, the Finance Ministry confirmed a delegation will travel to New York next week to meet a Special Master designated by Judge Griesa, Daniel Pollack, to begin conversations. Having missed a June 30 bond payment, Argentina has a 30-day grace period before entering into selective default, which is the absolute worst scenario for everyone involved.Game theory suggests that in these prisoner’s dilemma situations, the best possible outcome, named Nash Equilibrium, is where both parties give up some of their potential gain in order to maximize joint payout. Assuming both are rational actors, the optimum solution would be for Elliott Management to lower its pretensions of full payment (which it has hinted at) and for Argentina to offer something higher than 30 cents on the dollar (which Newman called “derisory”).It’s now Argentina’s move. Newman indicated that sending an unnamed delegation of low ranking officials to meet with the mediator, rather than face to face with the holdouts, is the wrong way to start. He is right. Cristina Kirchner would do well to send her highest ranking economic official, Finance Minister Axel Kicillof, with a proposal that is similar to recent settlements with the Paris Club and Spanish energy company Repsol, where a payment plan consisting of bonds and cash was used. “We are pretty flexible [about payment options],” Newman said, adding the Repsol and Paris Club settlements were good models for a potential solution.The biggest obstacle, beyond the political bickering that Cristina Kirchner has used to rally her base back home, is the Rights Upon Future Offers clause, or RUFO. By contract, Argentina can’t offer holdouts better terms than those offered in the previous restructurings, which the holdouts have already rejected. The key is that this clause expires with 2014. A good faith negotiation could push Judge Griesa to reinstate a stay that would allow the South Americans to avoid default, while preparing a palatable payment plan for next year.Importantly, this will also depend on Elliott Management, and their pretensions. Cristina Kirchner is right in noting that vulture funds buy defaulted bonds and then force payment, generally putting pressure on highly indebted and impoverished countries. Argentina has recovered from the mega default of 2001, but the economy is still weak and inflation is rampant. Foreign reserves have dwindled and currently stand below $30 billion. Expecting full payment in this situation is unreasonable.
2. ARGENTINE DEBT TEAM TO MEET WITH MEDIATOR: NATION HAS 30-DAY GRACE PERIOD TO AVOID ITS SECOND DEFAULT IN 13 YEARS (The Wall Street Journal Online)16. ARGENTINA’S DISPUTE WITH ‘HOLD-OUT’ CREDITORS ENTERS FINAL STAGE BUT NEGOTIATED SOLUTION TO AVOID TECHNICAL DEFAULT STILL FEASIBLE (IHS Global Insight Daily Analysis)17. THESE TWO DEBT PAYMENTS MAY BE HEARD AROUND THE WORLD; BOND-MARKET PARIAHS ARGENTINA AND PUERTO RICO ARE ON WATCH BY INVESTORS (MarketWatch)18. ARGENTINA ECONOMY STAGES APRIL UPTICK, FAILS TO DISPEL RECESSION FEARS (Dow Jones Institutional News)20. JURGEN KLINSMANN’S YODA — CESAR LUIS MENOTTI’S AGGRESSIVE IDEAS HAVE INSPIRED COACHES ALL OVER, INCLUDING THE U.S.’S (The Wall Street Journal)June 30, 2014The U.S. Supreme Court’s rejection this month of Argentina’s appeal in its fight with a group of bondholders caps a years-long court battle.The saga started when Argentina declared a moratorium on its debt payments in December 2001 amid the worst economic and social crisis in its modern history. That triggered what at the time was the largest sovereign default ever, involving some $100 billion.The Argentine government managed to restructure about 93% of that debt through heavily discounted bond exchanges in 2005 and 2010. But a small group of investors refused to tender their defaulted bonds for new securities, and they have hounded Argentina in courts across the globe for close to a decade seeking full repayment.In February 2012, a group of the holdouts, led by units of New York hedge funds Elliot Management and Aurelius Capital, won a landmark decision in a U.S. District Court. The case has wended its way through the appeals process for years. Earlier this month, the Supreme Court refused to hear Argentina’s last appeal. The court rulings give Argentina a choice: Pay the holdout creditors, or default on its current bonds.Key developments in the case:Feb. 23, 2012 – New York District Court Judge Thomas Griesa orders an injunction barring Argentina from making payments to holders of the restructured, or exchanged, bonds if it doesn’t also make “equal treatment” payments to a group of litigant holdout creditors led by Elliott Management and Aurelius Capital.March 5, 2012 – Judge Griesa issues a stay on the injunction pending an appeal. This buys time for Argentina, allowing it to keep paying exchange bondholders without paying the holdouts.Oct. 26, 2012 – The Second Circuit Court of Appeals in New York largely upholds the District Court decision on equal treatment and endorses the injunction on payments.Nov. 28, 2012 – The appeals court reissues the stay, allowing Argentina to continue payments to exchange bondholders until a final ruling on appeal is reached.March 1, 2013 – The appeals court orders the Argentine government to submit a proposal for paying the holdouts by March 29. In Buenos Aires, President Cristina Kirchner for the first time says her government is willing to make payments but only at a level consistent with prior debt exchanges.March 29, 2013 – One hour before a midnight deadline, Argentina unveils a proposal for paying holdout creditors. The offering is similar to previous debt exchanges and valued by analysts at far below the holdouts’ total claim.April 20, 2013 – Holdout creditors reject Argentina’s proposal to pay them about 20 cents on every U.S. dollar of bonds they own, leaving a U.S. appeals court to decide whether Argentina’s proposal complies with the lower-court ruling that holdout creditors must be treated the same as investors who hold its restructured bonds..Aug. 23, 2013 – The Second Circuit Court of Appeals says Argentina’s offer to holdout creditors wasn’t enough and reiterates that if Buenos Aires pays exchange bondholders, it must also pay holdout bondholders 100% of what they are owed. However, the appeals court keeps a stay on the ruling in place while the U.S. Supreme Court decides whether to review the case.Oct. 7, 2013 – The U.S. Supreme court declines to hear Argentina’s appeal. However, Buenos Aires will have another opportunity to petition the Supreme Court because its appeal to the Second Circuit Court to reconsider its decision is still pending.Nov. 18, 2013 – The Second Circuit Court rejects Argentina’s request that it reconsider its earlier decision. The request had faced long odds because appeals courts don’t routinely reconsider their decisions.Feb. 19, 2014 – Argentina again appeals to the Supreme Court, asking it to reverse the lower-court rulings. Lawyers for the Argentine government argue that it deserves a chance to explain why lower courts have misinterpreted a clause in defaulted bonds and trampled on the country’s sovereign immunity.June 16, 2014 – The U.S. Supreme Court rejects Argentina’s appeal.June 17, 2014 – Argentina’s Economy Minister proposes debt swap that would put some restructured bonds under Argentine law.June 18, 2014 – Argentina says it will negotiate with holdouts in New York. Judge Griesa says a debt swap would violate his ruling.June 23, 2014 – Daniel Pollack, a lawyer with McCarter & English, appointed special master overseeing talks between Argentina and the holdouts.June 26, 2014 – Judge Griesa denies Argentina’s request to stay his ruling to give the country more time to reach a deal. Argentina deposits $539 million with Bank of New York Mellon Corp. for its next payment to bondholders.June 27,2014 – Judge Griesa tells Bank of New York to return Argentina’s money, says a deal is unlikely before payment is due.June 30, 2014 – Argentina’s payment to restructured bondholders is due. Failure to pay starts a 30-day grace period before the country defaults.2. ARGENTINE DEBT TEAM TO MEET WITH MEDIATOR: NATION HAS 30-DAY GRACE PERIOD TO AVOID ITS SECOND DEFAULT IN 13 YEARS (The Wall Street Journal Online)By Ken Parks and Nicole HongJune 30, 2014BUENOS AIRES—Argentina said Monday night that it will send a delegation to meet with a court-appointed lawyer on July 7 as it tries to resolve a dispute with a small group of creditors that could see the South American country default for a second time in 13 years.Argentina’s long-running battle with hedge funds in U.S. courts entered a critical phase after U.S. District Judge Thomas Griesa on June 27 blocked the country from making $539 million in interest payments that were due on some of its bonds Monday.Argentina will likely default if it can’t get that money to bondholders before a 30-day grace period expires in July. The judge has ruled that Argentina must pay the hedge funds that are suing to collect on defaulted bonds at the same time it pays investors who own bonds the country issued after its 2001 default.Monday’s announcement marks the first time that Argentine officials are set to meet with Daniel Pollack, the New York attorney Judge Griesa named last week to oversee negotiations between the two sides.Argentina’s Economy Ministry said it intends “to negotiate in fair, equitable and legal conditions that take into account the interests of 100% of its creditors.”The news comes shortly after one of the holdout creditors, Elliot Management Corp., said that the country has refused to negotiate any aspect of the dispute. There have been no negotiations and no negotiations are under way, Elliot said.Attorneys for both parties participated in conference calls hosted by Mr. Pollack on Friday and Saturday that apparently made little progress. Those calls followed a visit to New York last Thursday by Economy Minister Axel Kicillof, who spoke at the United Nations about Argentina’s fight with the hedge funds before boarding a return flight to Argentina.Argentina defaulted on about $100 billion of its debt during an economic crisis in 2001. The country in 2005 and 2010 offered holders of the defaulted bonds new, heavily discounted debt in exchange. Between the two swaps, investors agreed to exchange almost 93% of the defaulted bonds.However, hedge funds led by Elliott’s affiliate NML Capital Ltd. and Aurelius Capital Management LP decided not to tender their bonds and instead sued for full repayment. So far, they have won about $1.5 billion in the courts after years of litigation.Argentine officials have refused to pay the holdouts in full, arguing that a settlement would trigger billions of dollars in claims by other creditors and bankrupt the country. Argentina has virtually run out of legal options to appeal the ruling after the U.S. Supreme Court on June 16 denied its appeal and left in place Judge Griesa’s decision that Argentina must treat its different groups of creditors equally.President Cristina Kirchner’s government has accused Mr. Griesa of favoring the holdout creditors and trying to push the country into default.Jorge Capitanich, Mrs. Kirchner’s cabinet chief, said earlier Monday that Argentina might put its grievances before unnamed international organizations.Shane Romig contributed to this article.By Nicole Hong and Ken ParksJune 30, 2014Elliott Management Said Argentina Has “Refused To Negotiate Any Aspect Of This Dispute.”No negotiations are under way between Argentina and its holdout creditors, one of the creditors said Monday.In an emailed statement, Elliott Management Corp. said Argentina has “refused to negotiate any aspect of this dispute,” adding that there have been no negotiations and no negotiations are under way. Elliott Management Corp.’s NML Capital Ltd. is one of a small group of hedge funds who have refused Argentina’s restructuring offers since its 2001 default and have sued Argentina for full payment.Argentina must negotiate a settlement with holdouts to avoid its second default in 13 years as U.S. court rulings have said Argentina can only pay its restructured bondholders if it pays the holdout creditors at the same time. Because of this, Argentina is expected to miss an interest payment on its restructured bonds Monday. The country now has a 30-day grace period to make up the payment and avoid a full-blown default.“Argentina’s government has chosen to put the country on the brink of default,” said Jay Newman, senior portfolio manager at Elliott Management. “We sincerely hope it reconsiders this dead-end path.”Argentina’s Economy Ministry declined to comment on the statement. Lawyers representing Argentina at Cleary Gottlieb Steen & Hamilton LLP also declined to comment.Last week, the U.S. District Court appointed an attorney, Daniel Pollack, to conduct negotiations between Argentina and the holdouts.Attorneys for both parties participated in a conference call hosted by Mr. Pollack on Friday and Saturday afternoon, according to a person briefed on the matter. In both cases, Argentina’s lawyers insisted on the reinstatement of the stay, which would postpone the enforcement of the U.S. court order, as a condition for starting negotiations, the person said.Argentina’s lawyers already requested a reinstatement of the stay on June 23, a request that the U.S. District Court denied three days later.June 30, 2014Argentina is on track to miss an interest payment on Monday, setting in motion a 30-day grace period for the country to make the payment and avoid its second default in 13 years.Why is Argentina missing an interest payment?Argentina is expected to miss at least $500 million in interest payments on some of its restructured bonds Monday. This is because U.S. courts have said Argentina is not allowed to pay its restructured bondholders unless it pays a small group of hedge funds, known as the holdout creditors, at the same time. These holdouts have refused to accept Argentina’s restructuring offers from its default in 2001. Since Argentina has not yet paid the holdouts, it’s not allowed to make the interest payment on Monday.Does that mean Argentina is in default?Not yet. Argentina has a 30-day grace period to make up the interest payment and avoid another default. In other words, Argentina now has the month of July to reach some settlement with the holdouts. However, Standard & Poor’s Ratings Services or Fitch Ratings could downgrade Argentina to “selective” or “restricted” default anytime in the next month, depending on how negotiations are going. Moody’s Investors Service does not have a default rating.Why can’t Argentina just ignore U.S. courts and send the payment to restructured bondholders?Argentina tried to do this last week by depositing more than $500 million with Bank of New York Mellon, which sends payments from Argentina to its restructured bondholders. However, BNY Mellon would be violating U.S. court order if it sent the payments. A federal judge on Friday explicitly told BNY Mellon to return the money to Argentina.Why won’t Argentina just pay the holdouts?Argentina has argued that paying the holdouts, which are owed around $1.5 billion in this specific case, would open the door to an avalanche of other creditor claims. Argentina has said these claims could exceed $120 billion; some analysts estimate this figure could be much lower. Argentina has repeatedly called the holdouts “vultures” and likened their efforts to “extortion,” saying that creditors scooped up Argentina’s bonds at a cheap price and are now demanding full payment for them.What next?Everyone is now waiting to see whether Argentina and the holdouts can strike a deal by the end of the grace period on July 30. The U.S. District Court has appointed a lawyer to conduct negotiations, but one of the holdouts, Elliott Management Corp.’s NML Capital Ltd., said in a statement Monday that no negotiations are underway and that Argentina has refused to negotiate. Argentina’s economy minister and lawyers declined to comment on that statement.By Peter EavisJuly 1, 2014Argentina’s government has 30 days to decide whether it should try to make peace with a group of New York hedge funds that it has bitterly fought for years in a dispute that could change the global market for government bonds.The hedge funds, after a series of important victories in United States courts, have managed to back Argentina into a daunting legal corner. Judge Thomas P. Griesa of the Federal District Court in Manhattan has told the country that it cannot make payments on its main class of foreign bonds without also paying the defaulted bonds that the hedge funds hold.Argentina was scheduled to make a payment to its main bondholders on Monday. The country had put $539 million in the Bank of New York Mellon, but the bank, not wanting to violate the court order, had said that it would not pass on the money to the bondholders.The bonds now have a 30-day grace period in which late payments can be made. In that period, Argentina may decide to compromise with the hedge funds, known as holdouts, or take drastic measures, including an outright default on its main foreign bonds. A default could further weaken Argentina’s fragile economy.“Huge financial matters have been resolved, or at least the foundations have been accomplished, in 30 days,” said Henry Weisburg, a partner at Shearman & Sterling who has written frequently on the Argentine case. “But it probably looks grim.”Last week, Judge Griesa appointed a special master to oversee negotiations between the hedge funds and Argentina. But Argentina is not engaging, according to Elliott Management, a leading holdout firm. “There are no negotiations underway, there have been no negotiations,” Jay Newman, a senior portfolio manager at Elliott, said in a statement on Monday. Late on Monday, Argentina’s Ministry of the Economy said that the country intended to meet with the special master on July 7.A victory for the holdouts, according to some legal specialists, could give bondholders significantly more power when they negotiate with countries that want to cut their debt load after a default. Other legal experts, however, say that recent changes to bonds make it harder for holdouts to exert pressure. And the supporters of the holdouts say that countries that issue bonds under New York law should be held accountable to that law.Argentina ran out of legal options after the United States Supreme Court declined to take up the case in the middle of June. During its legal battles, Argentina’s president, Cristina Fernández de Kirchner, has called the holdouts “vultures.” Argentina is refusing to pay the hedge funds’ bonds because they were not included in the bond exchanges that slashed the country’s debt load after its huge 2001 default. The bonds issued in the exchanges now make up the main class of Argentina’s foreign bonds, and the country had been paying them without hitch — until Monday.Some legal experts said that there was still a chance that a settlement could be reached.Although Argentina’s government has vowed it will not submit to the holdouts’ demands, it can now say to the Argentine people that it has no choice but to pay after taking its fight to the highest American court. On the other side, the holdouts may decide to concede some ground if Argentina proposes a sufficiently high payment. “The holdouts are not irrational,” said Marco E. Schnabl, a partner at Skadden, Arps, Slate, Meagher & Flom who has closely followed the case. “They are not in the business of a vendetta against Argentina. They are in the business of making money.”An agreement, if it starts to coalesce, may take more than 30 days. But if the special master says that the talks are making real progress, Judge Griesa may decide to temporarily lift his order against Argentina, giving negotiations more time. But the holdouts will want assurances that such a “stay” will not be used by Argentina to its advantage. Lawyers for Elliott Management asserted last week in a letter to Judge Griesa that they would want compensation, if a stay was granted.Argentina could allow a default at the end of July. The holdouts, seeing that the government has gone to such lengths, might then decide to soften their stance. Alternatively, the holdouts may hold firm until next year to see if the next Argentine government is less combative.Argentina may also use the next 30 days to plan a bold move in which it offers to swap its main class of bonds into securities issued out of Argentina and away from Judge Griesa’s court. But the holders of the bonds may not want to agree to such an exchange. And such a swap would most likely require the cooperation of foreign financial firms that would not want to participate in any maneuver that could fall afoul of Judge Griesa. Argentina, for instance, would need to know exactly who held its bonds, and the institutions that have that information may decline to provide it to the country. “There is no way they are turning that over without the court’s O.K.,” Mr. Weisburg said. “You couldn’t do a conventional exchange offer.”1 July 2014Argentina was likely to miss a bond payment Monday, setting it on a course for a possible catastrophic default.Argentina owes an interest payment to the majority of its creditors, but the government has a 30-day grace period to avoid going into its second default in 13 years.The U.S. Supreme Court recently turned down Argentina’s attempt to block a lower court ruling that it must pay hedge funds that own bonds left over from its record $100 billion default in 2001.U.S. District Judge Thomas Griesa urged Argentina on Friday to continue negotiating with the funds that refused to participate in debt swaps in 2005 and 2010. The judge also said it would be illegal for Argentina to make a payment to the majority of its bondholders without also paying more than $1.5 billion to the holdouts.Griesa appointed a special master last week to facilitate talks because Argentina indicated through its lawyers that it planned to negotiate for the first time with the U.S. bondholders, led by New York billionaire Paul Singer’s NML Capital.The holdout creditors accused Argentina on Monday of refusing to begin talks.“There are no negotiations underway, there have been no negotiations, and Argentina refuses to commit to negotiations in the future,” Elliott Management, which runs NML, said in a statement. “Argentina’s government has chosen to put the country on the brink of default. We sincerely hope it reconsiders this dead-end path.”Later Monday, Argentina’s economy ministry issued a statement saying it would send a delegation to New York to meet with the debt negotiation mediator on July 7.Jun 30, 2014Argentina will likely miss a bond payment on Monday, setting it on a course for a possible catastrophic default.Argentina owes an interest payment to the majority of its creditors, but the government has a 30-day grace period after Monday to avoid going into its second default in 13 years.The U.S. Supreme Court recently turned down Argentina’s attempt to block a lower court ruling that it must pay hedge funds that own bonds left over from its record $100 billion default in 2001.U.S. District Judge Thomas Griesa urged Argentina on Friday to continue negotiating with the funds that refused to participate in debt swaps in 2005 and 2010. The judge also said it would be illegal for Argentina to make a payment to the majority of its bondholders without also paying more than $1.5 billion to the holdouts.Griesa appointed a special master last week to facilitate talks because Argentina indicated through its lawyers that it planned to negotiate for the first time with the U.S. bondholders.President Cristina Fernandez has long refused to negotiate with the plaintiffs led by New York billionaire Paul Singer’s NML Capital Ltd., who spent more than a decade litigating for payment in full rather than agreeing to provide Argentina with debt relief. But Fernandez has been backed into a corner by NML Capital’s payment plan.The holdout creditors accused Argentina on Monday of refusing to begin talks.“Argentina’s professed willingness to negotiate with its creditors has proven to be just another broken promise. NML is at the table, ready to talk, but Argentina has refused to negotiate any aspect of this dispute,” Elliott Management, which runs NML said in a statement.“There are no negotiations underway, there have been no negotiations, and Argentina refuses to commit to negotiations in the future. Argentina’s government has chosen to put the country on the brink of default. We sincerely hope it reconsiders this dead-end path.”Paying the hedge funds that she often calls “vultures” in full would likely trigger lawsuits from other bondholders demanding to be paid on similar terms. Argentina’s government estimates that the liability could run up to $15 billion.With nearly $29 billion in foreign reserves, Argentina appears to have the money to pay its bills. But those reserves include loans to other countries, deposits with the IMF and other assets that aren’t easily used. Take those away, and Argentina has roughly $16 billion on hand.Troubled countries often find bond investors willing to lend to them to pay other creditors. But Argentina has been locked out of the bond markets for more than a decade. Some investors would probably step up to lend it money, but at high interest rates — and at high political cost for the leftist government.Fernandez and her husband, the late President Nestor Kirchner, have used much of the Central Bank’s reserves to pay down Argentina’s debts, provide energy subsidies and fund social programs, weakening its ability to control one of the world’s highest inflation rates and manage the money supply.“This is a legal chess game,” said Alberto Ramos, Latin America analyst at Goldman Sachs.“If (Argentina) solves this, its worries about reserves disappear. The worry about reserves comes from the fact that this is still an open issue that prevents access to normal and conventional sources of financing.”Associated Press writers Matthew Craft in New York and Luis Andres Henao in Santiago, Chile contributed to this report.By Camila Russo2014-06-30June 30 — Benoit Anne, head of emerging-market strategy at Societe Generale SA, discusses Argentina’s debt payments and the impact of a possible default on Latin American assets. He talks with Guy Johnson on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)Elliott Management Corp. said Argentina is refusing to negotiate a settlement over defaulted bonds, casting doubt on the country’s ability to avoid another debt debacle after a U.S. court blocked all its note payments until a deal is reached.“Argentina’s professed willingness to negotiate with its creditors has proven to be just another broken promise,” Jay Newman, a money manager at the hedge fund run by billionaire Paul Singer, said in a statement today. “There are no negotiations underway, there have been no negotiations, and Argentina refuses to commit to negotiations in the future.”The nation has a 30-day grace period after missing $539 million of debt payments due today in dollars, euros and yen to avoid its second default in 13 years. The U.S. Supreme Court on June 16 left intact a ruling requiring Argentina pay about $1.5 billion to defaulted debt holders as it makes payments on restructured bonds that stemmed from its 2001 default. Argentina last week transferred funds to its bond trustee to pay restructured notes without providing funds for the holdouts, only to have U.S. District Court Judge Thomas Griesa order the payment sent back while the parties negotiate.By Leah McGrath Goodman6/30/14The fate of Argentina’s economy now rests on its ability to resolve a dispute with a group of bondholders led by a multibillion-dollar hedge fund.“Argentina’s professed willingness to negotiate with its creditors has proven to be just another broken promise,” said Jay Newman, a portfolio manager at Elliott Management Corp., a New York hedge fund that specializes in profiting off complex legal disputes that, like in the case of Argentina, often take years to resolve.The fund’s NML Capital division is leading a group of 19 plaintiffs seeking full payment of their Argentine bonds totaling an estimated $1.5 billion — most of which were bought for cents on the dollar as Argentina slid into default in 2001. Monday marks the country’s second descent into default in 15 years.“Argentina has refused to negotiate any aspect of this dispute,” Newman stated, breaking his silence for the first time since mediated discussions were attempted last week. “There are no negotiations underway, there have been no negotiations, and Argentina refuses to commit to negotiations in the future.”A person briefed on the discussions told Newsweek that the talks simply failed to launch, hitting a wall Saturday as Argentina proved inflexible to the hedge funds’ starting point and vice versa.From the vantage point of Elliott, Argentina’s lawyer have issued demands instead of starting negotiations in earnest, the person said. Special master Daniel Pollack, the court-appointed mediator in the talks, stated last week that the two sides were in communication, but had not reached a settlement.Elliott’s Newman issued his statement by email Monday, the same day Argentina was due to make a $539 million bond payment to another set of bondholders who agreed to partial payments on their bonds years ago – unlike the hedge fund “holdout” group led by Elliott Management.Under U.S. law, Argentina cannot legally pay one bondholder group without paying the other. Argentina’s dispute with this “equal treatment” finding by a U.S. District Court was the subject of a Supreme Court appeal rejected by the high court two weeks ago, which brought the long-simmering dispute to a head.If Argentina does not pay both bondholder groups Monday, it triggers a 30-day grace period that will force the country into default July 30 if it does not come up with all of the funds in time.In the wake of the Supreme Court’s rejection of Argentina’s case, the country’s president, Cristina Kirchner, vowed in a national broadcast earlier this month not to “submit the country to such extortion” by what she called “the vulture funds.”Part of Argentina’s argument against paying the holdout hedge funds in full is that this could land it in a legal quandary where it may have to do the same for the rest of its bondholders, most of whom agreed in 2005 and 2010 to reduced bond payments under an exchange agreement. If this happens, Kirchner estimated, it could cost the nation as much as $15 billion, which it cannot afford. (Elliott Management disputes this, putting the number at closer to $6 billion.)“It’s our obligation to take responsibility for paying our creditors, but not to become the victims of extortion by speculators,” Kirchner said in her national broadcast.In an effort to pay the exchange bondholders accepting partial payment – and exclude the holdout bondholders such as Elliott Management – Argentina transferred $539 million to bond administrator Bank of New York Mellon Corp. last week, provoking the ire of District Court Judge Thomas Griesa.The judge had forbade Argentina from paying just the exchange bondholders and not the holdouts as part of an injunction that bound Argentina under the bonds’ antiquated “pari passu” provision, a Latin term meaning “with an equal step,” buried in the original bonds’ fine print. This clause is the real reason why the fate of the holdout bondholders is tied to that of the exchange bondholders, who have strenuously objected to being held hostage to these proceedings.Calling the financial transfer an “explosive action” that could up-end settlement talks with the hedge fund-led bondholders such as Elliott, Judge Griesa demanded that Bank of New York Mellon return the funds to Argentina until it could pay both sets of bondholders.Much is at stake for Argentina, as its refusal to pay the hedge fund-led holdouts, which include heavyweight New York hedge fund Aurelius Capital Management, could decimate the country’s chances for financial recovery.In addition, there could be dire consequences for the exchange bondholders who only reluctantly agreed to reduced payments from Argentina and now are getting nothing.In court proceedings last year, David Boies, a lawyer representing the exchange bondholders, told a panel of judges reviewing Griesa’s injunction that if Argentina defaults, it would destroy the value of the bonds. “It’s going to be terrible for my clients,” he told the panel. Turning to the lawyer for Elliott’s NML division, he said: “They’re going to profit from the default.”The past two week’s events do not bode well for Argentina, which faces heightened potential for financial ruin no matter what it does.With Argentina still attempting to defy the U.S. court orders, resisting negotiations and taking out ads in major newspapers casting its opponents in a negative light, it is increasingly looking like the 30-day grace period may be for naught and the already financially troubled country may skid into default.Over the weekend, Argentina made it clear to the hedge fund-led holdout group that it would not proceed with negotiations unless the equal treatment provision on its bonds was lifted indefinitely and Argentina could make its $539 million payment to the exchange bondholders Monday – but not the holdout group, according to the person briefed on the discussions. Without strong legal protections in place, that wasn’t a viable option for Elliott Management and the rest of the holdout group, this person said. The demands of each side left talks at a standstill.“Argentina’s government has chosen to put the country on the brink of default,” Newman said. “We sincerely hope it reconsiders this dead-end path.”By Daniel BasesJun 30, 2014Holdout investors in Argentine sovereign debt said on Monday they have not met with the government to negotiate a settlement on defaulted debt, and accused Buenos Aires of refusing to enter talks as a 30-day countdown to default begins.Holdout investors are led by Elliott Management’s NML Capital Ltd and Aurelius Capital Management, two hedge funds that specialize in buying up deeply discounted or distressed debt and negotiating profitable settlements, often through the use of the courts.“Argentina’s professed willingness to negotiate with its creditors has proven to be just another broken promise. NML is at the table, ready to talk, but Argentina has refused to negotiate any aspect of this dispute,” said Jay Newman, senior portfolio manager at Elliott Management.“We sincerely hope it reconsiders this dead-end path,” Newman said, noting there have been no negotiations so far and the government has refused to commit to negotiations in the future.Argentina late on Monday said it would send a delegation to New York to meet on July 7 with court-appointed mediator Daniel Pollack. It made no mention of whether it would sit down with the holdouts.“Argentina is reiterating its desire to negotiate according to just, equitable and legal conditions that take into account the interests of 100 percent of creditors,” the economy ministry said in a statement.In 2012, U.S. District Judge Thomas Griesa in New York awarded the holdouts $1.33 billion plus accrued interest in a case based upon the pari passu, or equal treatment, clause used to sell the bonds originally in 1994.The award, which says Argentina must make payment to holdouts at the same time it pays investors who accepted two sovereign debt restructurings in 2005 and 2010, was upheld on appeal and denied a hearing by the U.S. Supreme Court, effectively exhausting Argentina’s U.S. legal recourse.Last week Argentina defied Griesa and made a scheduled coupon payment of $539 million due June 30 on restructured bonds, saying it was bound by Argentine law to make the payment.The money was deposited in the Bank of New York Mellon’s account at the Central Bank of Argentina without making the court-ordered payment to holdout investors at the same time.In total the government transferred $832 million for payment to various bondholders last week.As a result of Griesa’s ruling, U.S. banking institutions are blocked from making delivering payments to exchange bondholders. BNY Mellon told Griesa on Friday it did nothing with the deposit.A BNY Mellon spokesman told Reuters the bank had no further comment beyond a notice issued Monday to exchange bondholders stating the court order stopped it from making the payments.Now the clock starts on a 30-day grace period for Argentina to either come to an agreement with holdouts and unblock payment to exchange bonholders by July 30 or default on its bonds for a second time in 12 years.Griesa named Pollack, a veteran New York financial trial lawyer, to try to mediate a settlement between Argentina and the holdouts.Argentina defaulted on roughly $100 billion in sovereign debt in 2001-2002 and negotiated a restructuring with eventually 93 percent of bondholders in a deal widely considered one of the most onerous for investors in history, paying between 25 and 29 cents on the dollar.Griesa on Friday called Argentina’s deposit with BNY Mellon illegal and said that the money should “be returned to the Republic, simple as that.”Argentina responded saying the deposited money no longer belonged to the government. Its status remains unknown.“The Argentine government seems determined to cause many billions of its debt to accelerate on July 30 and start yet another Argentine debt crisis. This is completely avoidable. An eminently affordable settlement can be reached with the holdouts, yet Argentina’s administration refuses even to meet,” Mark Brodsky, chairman of Aurelius said in a statement.The cost to insure a portfolio of Argentine sovereign debt has risen in the last week. An investor wanting to insure a $10 million trade for one year would need to spend $2.92 million as an up front cost plus an additional $500,000, according to data provider Markit on Monday.DEFAULT COUNTDOWN STARTSThe failure to deliver the coupon payment on restructured bonds by the end of business on Monday means Argentina is technically in default.Varun Gosain, a portfolio manager at New York-based Constellation Capital Management with investments in Argentine assets who participated in the debt exchanges, is not necessarily reconciled to a default in 30-days.“Both parties have incentives to try and move things forward. You don’t need an agreement by July 30th, but you need everybody to think it is better to keep negotiating,” he said.Argentina says it cannot voluntarily offer better terms for a restructuring with holdouts because of a provision called the Rights upon Future Offers (RUFO), which expires on Dec. 31. It is designed to stop anyone getting a better deal than the exchange bondholders.“I think RUFO is a big concern. Any agreement has to negotiate around it and if is not properly dealt with it could create a big contingent liability,” said Gosain.Argentina says an agreement with holdouts would open it to the risk of claims from other holdouts as well as exchange bondholders that would bankrupt the country.On June 25 Economy Minister Axel Kicillof came to New York for 10-hour visit to speak at a meeting of the G77 plus China Committee at the United Nations. He said the country was being pushed into default though he did not meet with holdouts.When Kicillof announced money was deposited with BNY Mellon, the government issued a statement mentioning “eventual judicial actions that would allow us to exercise our rights as a member of the international community … before the International Criminal Court in the Hague.”This hints the government might try to take a new legal avenue to avoid the U.S. court order.Kicillof is due back in the United States on Thursday to attend an Organization of American States meeting in Washington.(Additional reporting by Hugh Bronstein, Alejandro Lifschitz, Sarah Marsh and Jorge Otaola in Buenos Aries; Editing by Chizu Nomiyama, W Simon and Andrew Hay)By Alison Frankel30 June 2014(The opinions expressed here are those of the author, a columnist for Reuters.)Argentina continues to search for a tenable position in its war with the hedge funds it’s due to pay about $1.65 billion by July 30, under rulings affirmed earlier this month by the U.S. Supreme Court.Late last week, after previously suggesting that it would be open to negotiations with the hedge funds to avert a default on its restructured debt, Argentina deposited about $530 million with the Bank of New York Mellon to pay exchange bondholders, seemingly in defiance of U.S. court orders, then threatened to bring an action in The Hague against the United States and U.S. District Judge Thomas Griesa of Manhattan for violating international law.On Friday, at the latest hearing in this mess, Griesa refused to grant Argentina a stay of the injunction requiring it to pay the hedge funds at the same time it pays exchange bondholders. He told BNY Mellon to return the $530 million deposit from Argentina, which he said was an “improper” violation of his orders. (Argentina said it is caught between competing Argentine and U.S. legal directives.)Griesa, who has twice returned from vacation to preside over emergency hearings in the last two weeks, was so impatient with Argentina’s brinkmanship that he also on Friday finally threatened contempt of court for anyone who attempts to evade his injunctions.But Griesa once again seemed to go out of his way to spare Argentina’s lawyers at Cleary Gottlieb Steen & Hamilton from his ire. As I’ve reported in previous columns, the holdout NML Capital has specifically targeted Cleary along with its client, arguing that the law firm advised Argentina on a plan to shift payments to exchange bondholders out of the reach of U.S. courts, and then misrepresented Argentina’s intentions to both the U.S. Supreme Court and Judge Griesa.NML counsel Robert Cohen of Dechert kept up that drumbeat on Friday, again arguing to Griesa that Cleary had made assurances to the judge that had not panned out. Cleary had assured Griesa that Argentina wouldn’t violate his orders, but Argentina promptly did, Cohen said.‘FAIR AND SQUARE’Griesa wasn’t buying it. He chided Argentina’s lawyer Carmine Boccuzzi of Cleary for requesting a stay in letters to him rather than in a formal motion, but in the same breath complimented Boccuzzi and Cleary partner Jonathan Blackman on their skills. More significantly, he said later in the hearing that he has no problem with the actions of the Cleary lawyers.“I want to say this to Mr. Boccuzzi and Mr. Blackman,” Griesa said. “I’ve had trouble, and I’ve expressed it, with the Republic. But both of you have been fair and square in every way before me, and I appreciate that.”The Argentina debacle won’t be solved before next week at the earliest. Despite Griesa’s urging, Argentine officials still have not sat down for talks with the hedge funds and the Griesa-appointed special master. On Monday, NML senior portfolio manager Jay Newman issued his first public statement on the crisis: “NML is at the table, ready to talk, but Argentina has refused to negotiate any aspect of this dispute,” he said. “There are no negotiations under way, there have been no negotiations, and Argentina refuses to commit to negotiations in the future. Argentina’s government has chosen to put the country on the brink of default. We sincerely hope it reconsiders this dead-end path.”I’m sure that Cleary’s priority right now is Argentina’s imminent default, not Judge Griesa’s regard for the firm. But it must be nice for the firm to know that the judge doesn’t hold Cleary responsible for its client’s defiance.A Cleary spokeswoman declined to comment.By Matt LevineJUN 30, 2014Very little about the Argentina situation is at all clear, but this is reasonably clear: Argentina won’t default on its bonds today. Not because everything will magically get wrapped up by 5 o’clock, but just because Argentina’s $539 million interest payment due today is subject to a 30-day grace period, so it’s really due 30 days from today.The story, remember, is: Argentina has some exchange bonds, which it wants to pay, and some holdout bonds, which it doesn’t. Judge Thomas Griesa, of the U.S. District Court for the Southern District of New York, has ordered it not to pay the exchange bondholders unless it also pays the holdout bondholders, led by Elliott Management.(1)What can Argentina do in the next 30 days? One obvious answer is to negotiate a quick settlement with the holdouts. Two weeks ago I assumed that that’s what would happen, since both sides have really good reason (1) to want a deal and (2) to want a deal before Argentina defaults. Since then, though, you would not say the rhetoric has been particularly friendly? Here is a furious, all-caps “Official Communiqué of the Argentine Government,” published today, denouncing the “judge’s bias in favour of the vulture funds.” A friendly settlement does not exactly feel imminent, though again, they’ve got a month, and they do seem to like dramatic brinksmanship.But what are the other options, besides negotiated settlement and catastrophic default? Below I’ve collected some schemes that I find interesting, which are very different from schemes that I think would work. These are just ideas that tickled my fancy, and that I pass along to you in case you are similarly ticklish.Scheme 1: Default, then settle using CDS money.This scheme looks a lot like settling before the 30-day grace period expires, except that it takes place just after the 30-day grace period expires. Argentina misses the grace period, defaults on its exchange bonds, then cures that default by paying interest the next day. And the day after that, it announces a settlement with Elliott and friends.What is the appeal of this plan? Well, as I’ve noted before, it is widely (though not universally) assumed that Elliott owns a lot of credit default swap protection on Argentina’s bonds. If Argentina defaults, that will trigger that CDS, and Elliott will be in line for a big payout. If that payout is, say, $500 million, then Elliott should be indifferent between receiving, say, $2 billion worth from Argentina or $1.5 billion from Argentina and $500 million from its CDS contracts.(2)In other words, this is the trick that Blackstone used with Codere: Do a quick default on your bonds so that your creditors get paid on their credit default swaps, and have them apply the money they got from their CDS to get you more favorable terms. I was fond of this trick when Blackstone used it, and I’d be at least as fond of it if Argentina did the same.One problem with this scheme is that it is not entirely clear how much CDS Elliott owns, and so how much value can be extracted there. Also, any settlement probably involves giving Elliott new bonds, and a default does nothing good for the value of those bonds. If Argentina defaults again — particularly as part of a scheme with Elliott — that is not, you know, great for its reputation in the international bond markets.(3)The other potential problem is: This requires actually paying Elliott. I don’t know if this is a problem! Giving Elliott some money is sort of a necessary part of settling this dispute. But if Argentina really is prepared to go to the ends of the earth to prevent Elliott from seeing a dime — as its rhetoric sometimes suggests — then this trick won’t appeal very much.Scheme 2: Nondefault default.This scheme involves Argentina sending money to its paying agent, and then saying, “What? We paid, it’s not our fault if the U.S. payment system didn’t get the money to the holders.” Adam Levitin suggested this scheme on Credit Slips, and it seems to be a big part of Argentina’s current plan. In defiance of Judge Griesa’s orders, Argentina deposited the interest money with Bank of New York Mellon, the paying agent for the bonds. (Judge Griesa told BNY Mellon to send the money back.) That Official Communiqué is titled “Argentina Pays,” and Joseph Cotterill interprets it to mean that Argentina is “prepared to argue that any payment it tries to make is enough to fulfil its obligations to the restructured bondholders: if the payment doesn’t go through, it’s the system’s fault.”This is not so much a scheme as it is just saying some magic words. One problem here is that those magic words may not be effective to avoid default under the terms of the bonds.(4) But the bigger problem is that the magic words don’t get money to holders, and eventually they will want their money. If your goal is to maintain access to the international capital markets, a technical argument that you’ve paid your debts isn’t nearly as good as actually getting money to your creditors.Scheme 3: Pay by check.OK, now we’re getting into the creepy stuff. This scheme starts with the fact that the investors who own Argentina’s exchange bonds don’t own any bonds. Instead, all the bonds are owned by nominees for clearing systems such as the Depository Trust Company (in the U.S.) and Euroclear and Clearstream (in Europe) on behalf of the investors, who own only claims on those clearing systems.(5) This is true of basically all stocks, bonds, etc., and is normally very convenient: If you want to transfer a bond, you don’t have to messenger over a very valuable piece of paper. You just have DTC make a few entries in your electronic account. The “global note” stays at DTC and never changes hands.So the way payment normally works is, Argentina wires money to its paying agent, Bank of New York Mellon(6); BNY Mellon wires the money to DTC as global noteholder; and DTC wires the money to its participants. (The participants tend to be brokers, so they’re wiring the money on to their investor clients.)The problem in this chain is around BNY Mellon: Judge Griesa won’t let BNY Mellon send the money on to DTC, so it can never get to the holders. (The economic holders, that is: The DTC participants and their customers, not the technical global note holders.) On the other hand, if Argentina just put $100 bills in envelopes and mailed them to the economic holders, it’s hard to see how Judge Griesa could stop it. Even if Argentina sent the bondholders checks, or even wire transfers, it could probably get away with that, since Judge Griesa’s injunction doesn’t apply to pure intermediary banks.But Argentina doesn’t know who the holders are: The only official holders of the bonds are the nominees of DTC and Euroclear/Clearstream. With corporate bonds, there’d be a solution: The holders could cut out the middleman by going to DTC and asking for a “certificated note” — that is, for DTC to take your bonds out of its pool and give you an actual physical piece of paper representing your own bond. Then once you have your own bond, just, like, ask Argentina to send you a check.Now, this doesn’t seem to work for Argentina: Its bonds can only be held in global note form, unless Argentina decides to issue certificated notes.(7) Can it just decide to do that? It … seems unlikely. It would clearly be a violation of the injunction by Argentina,(8) though Argentina doesn’t care about that. But the injunction also applies to Argentina’s agents, including BNY Mellon and DTC, and it would probably violate the court order for them to participate in any exchange like this.The other problem here is that holding certificated notes is a big pain for the holders: They’re harder to trade, to repo, to finance, everything. So if your goal is not to hose the exchange bondholders, making them hold certificated notes, even if you could do it, doesn’t seem great.Scheme 4: Forced wire transfers.Here’s one further layer of creepy, suggested to me by an emerging markets fund manager. This gets into the details of how Argentina has sent the interest payment to BNY Mellon. Here’s what Argentina says (though it says it in all caps):The Argentine Republic … has proceeded to pay principal and interest on its bonds under foreign law in an amount equivalent to USD 832 million, 539 million of that figure deposited in Bank of New York Mellon (BONY) accounts #15098 and #15002 in the Central Bank of the Argentine Republic.Who has that money? Well, what do you mean by “has,” and what do you mean by “money”? Argentina “paid” that money by telling its central bank to electronically credit some dollars to BNY Mellon’s account at the central bank. And BNY Mellon, in violation of the indenture but in accordance with a New York court order, didn’t send the money on to the exchange bondholders.What if Argentina ordered it to do so? Well, it probably wouldn’t resist Judge Griesa’s order. But what if Argentina “ordered” it to do so by making Argentina’s own central bank move that electronic credit from the BNY Mellon account to another account — say, the accounts (at the Argentine central bank or elsewhere) of the nominees for DTC, Euroclear and Clearstream?(9) After all, it’s all just electronic transfers, and right now those transfers are in the hands of Argentina’s central bank. If BNY Mellon is defying its obligations to Argentina, why can’t Argentina’s central bank correct that?That might be a little lawless, and I don’t know whether it could be done under Argentine law. But if it could, Argentina could have a little bit of fun by getting the money even one step further down the chain — not to BNY Mellon but to DTC, Euroclear and Clearstream.Now, it’s perhaps only a little bit of fun: Judge Griesa’s order forbids the clearinghouses from passing on payments to exchange bondholders, so the money might be just as stuck at DTC and Euroclear and Clearstream as it currently is at BNY Mellon. But maybe not.In particular, the holders of euro-denominated exchange bonds think that Judge Griesa’s order should not apply to Euroclear and Clearstream. Here’s the motion they filed on that subject yesterday, and — though I am no expert — it seems pretty compelling. In particular, the euro exchange bondholders argue that the payment process for the euro bonds occurs entirely outside of the U.S., that Euroclear and Clearstream are not subject to U.S. jurisdiction, and that Belgium and Luxembourg — where Euroclear and Clearstream, respectively, are located — forbid those clearinghouses from holding up payments because of a U.S. court order.So if Argentina can get the money to Euroclear and Clearstream, there’s a decent chance it can pay off its euro bondholders, at least: Either Judge Griesa will just release Euroclear and Clearstream from the order, or else a European court will order them to ignore the order and they’ll do so.(10)Getting the money to DTC doesn’t do as much for the holders of the (larger) U.S. dollar exchange bonds, but it does something. For one thing, if DTC has their money and doesn’t give it to them, the bondholders can sue it. So far this has been a hypothetical, as the money has never gotten that far, but if it does — if DTC is holding money solely as a clearinghouse for the exchange bondholders — then they have a case that it should give it to them. (And that DTC is not an agent of Argentina but rather just holding on to bondholders’ property.) It’s worth a shot: Judge Griesa will not sympathize, but perhaps an appeals court would.That’s particularly true if the euro-denominated bonds are getting paid while the U.S. dollar ones aren’t. Today is a bit of a rough day for the U.S. dollar as the global currency. BNP Paribas is being severely punished for violating U.S. law outside of the U.S., because it used dollars, and “Pretty much any dollar transaction — even between two non-US entities — will go through New York City at some point, where it comes under the jurisdiction of US authorities.” It’s enough to make you not want to use dollars for your international transactions.And so in fact here is a Wall Street Journal article about how Russian companies have come back to international capital markets using euros, not dollars, because “U.S. banks are still cautious about dealing with Russian borrowers amid the tensions with Ukraine and the lingering possibility of further sanctions.” The more useful the dollar is as an instrument of U.S. foreign policy, the less useful it is as a currency for global transactions.More generally, if you prevent one or two pariahs from using dollars, then you can cut them off from the global financial system. But if you prevent enough pariahs from using dollars, then you eventually cut the dollar off from the global financial system. We’re a long way from that, obviously. All the same, you can see the problem if Argentina’s euro bondholders get paid normally while its dollar bondholders are caught up in never-ending drama. A quick settlement here would be good for Argentina, and probably at least as good for Elliott. But it would be good for America too.(1) For more, see footnote 2 here. The Elliott entity involved is technically NML Capital, and Aurelius Capital is also a holdout plaintiff, but I just call the plaintiffs Elliott for my own convenience.(2) Actually Argentina would probably give it bonds, not cash, so it might prefer $1 of cash to $1 of present value of Argentine bonds.(3) Also of course the default could trigger acceleration by the exchange bondholders, and make Argentina’s problem even worse, though I think if you did it quick enough you could probably avoid that. See in particular section 4.2 of the indenture, which allows for cure of defaults before acceleration.(4) See Levitin’s post for more details, as well as the prospectus and indenture for the bonds.(5) There are limitless levels of detail here. Technically the bonds are not owned by DTC and Euroclear/Clearstream, but by “nominees” for those clearing systems. (See page S-19 of the prospectus.) DTC’s nominee is Cede & Co., while Euroclear’s and Clearstream’s is Bank of New York Depositary (Limited) in London. (See this declaration by a Bank of New York officer, as well as Judge Griesa’s 2012 opinion (“There are two registered owners for the 2005 and 2010 Exchange Bonds. One is Cede & Co. and the other is the Bank of New York Depositary.”).(6) Technically: “The Republic transfers funds to a US Dollar deposit account in the name of the Trustee at Banco Central.” The “Trustee” is Bank of New York Mellon as indenture trustee; “Banco Central” is the Banco Central de la Republica de Argentina, Argentina’s central bank.(7) See pages S-73 and S-74 of the prospectus.(8) From the injunction:The Republic is permanently PROHIBITED from taking action to evade the directives of this ORDER, render it ineffective, or to take any steps to diminish the Court’s ability to supervise compliance with the ORDER, including, but not limited to, altering or amending the processes or specific transfer mechanisms by which it makes payments on the Exchange Bonds, without obtaining prior approval by the Court;(9) Confoundingly, a BNY Mellon entity — though a U.K. one — is the Euroclear and Clearstream nominee. See footnote 5.(10) The euro bondholders also want the judge to excuse BNY’s Luxembourg branch, the paying agent on the euro bonds, from the order; that one seems harder. But if it works then Argentina can pay the euro bondholders without any shenanigans.30 June 2014Argentina appeared to let a Monday deadline pass without paying creditors, starting the clock on a 30-day grace period to avoid its second default in 13 years.U.S. courts have barred Argentina from making an interest payment scheduled for June 30 unless the country also pays a small group of hedge funds that have refused restructuring offers since its 2001 default. Argentina must reach a deal with these holdout creditors by July 30 or it will default on some of its restructured bonds.Both sides participated in conference calls with a court-appointed mediator late last week, but appeared far apart on Monday. Elliott Management Corp., which operates NML Capital Ltd., one of the holdouts, said in an emailed statement that no talks are currently under way and that Argentina has refused to negotiate.Mark Brodsky, the founder of Aurelius Capital LP, another holdout creditor, said in a separate email that “Argentina’s administration refuses to even meet.”Argentina’s Economy Ministry and lawyers representing Argentina at Cleary Gottlieb Steen & Hamilton LLP declined to comment.Despite the potential for default in a month, Argentina’s bonds are trading as if both parties will ultimately strike a deal. Argentina’s dollar bonds maturing in 2033, the ones due for an interest payment on June 30, were trading at 84 cents on the dollar, slightly lower than 85.2 cents on Friday. The yield edged up to 10.45% from 10.26%.Standard & Poor’s Ratings Services, Fitch Ratings and Moody’s Investors Service have all said a missed interest payment by Argentina isn’t an automatic trigger for a downgrade to default status. S&P and Fitch have said they could lower Argentina’s rating any time during the 30-day grace period, depending on the progress made during negotiations.Argentina has said repeatedly during its long battle with creditors that a settlement would open the door to an avalanche of other claims. Argentina has said these could exceed $120 billion and bankrupt the country, although some analysts estimate this figure could be much lower. The country has frequently called the holdouts “vultures” and likened their efforts to “extortion.”However, several officials, including President Cristina Kirchner, have more recently said they were open to talks with the holdouts.Last week, the U.S. District Court appointed an attorney, Daniel Pollack, to conduct negotiations between Argentina and the holdouts. Attorneys for both parties participated in conference calls hosted by Mr. Pollack on Friday and Saturday afternoon, according to a person briefed on the matter. Mr. Pollack confirmed the conference calls took place.In both cases, Argentina’s lawyers asked that the court delay enforcing its order barring payments to restructured bondholders as a condition for starting negotiations, the person said. The U.S. District Court denied a similar request last week.Matt Wirz contributed to this article.30 June 2014Argentina risks technical default by the end of Monday in its combat with so-called vulture funds over a U.S. court ruling that it must settle unpaid debts to bondholders, Agence France-Presse reported.The country must reach an agreement to pay $1.3 billion to these “vulture” hedge funds by the end of July to avoid default—but a decision by a judge on Friday has brought that danger even closer.Wheeling overhead are speculative funds that bought Argentinian bonds at the bottom of the market on the chance that they could extract full repayment later on.If they do, Buenos Aires could face a bill of up to $15 billion, which it says would bring it to its knees.Argentine President Cristina Kirchner has condemned what she terms “extortion” by the vulture funds.Argentina has made a first payment of $225 million (165 million euros) to bondholders who in 2005 and 2010 accepted that the value of debt owed by the country would be cut by 70%.That debt comes to maturity, or is due for repayment, on Monday.On Thursday, Argentina lodged slightly more than $1 billion, some of which was placed in a U.S. bank, to redeem those bonds.But a New York judge, Thomas Griesa, has ordered that money be returned and instead said two funds, which had bought bonds at a hugely depressed price on the market and refused to accept the restructuring terms, should be paid first.US judicial authorities ruled recently on long-running litigation that these funds, NML Capital and Aurelius Management, are entitled to full payment of the bonds, which Argentina was unable to honour when it went bankrupt in 2001.Negotiations on how payments might be made began under the aegis of a mediator in New York on Wednesday.The two funds have signalled that they would accept payment in treasury bonds.But such a settlement would have a big domino effect since other funds, known as holdouts, which refused to accept the restructuring terms, could demand similar treatment.That could cost Argentina a total of $15 billion.The central bank of Argentina has only $28.5 billion in reserves, the country has to import energy, and the economy is heading into recession. The government has warned that an extra bill of $15 billion would have the effect of tipping it into bankruptcy.To make the situation worse, a final payment to creditors who accepted the restructuring falls due on July 30. This is the second deadline, which could trigger default.“If, within a month, there is no agreement with the holdouts, the situation will become extremely difficult,” said Daniel Marx, an executive at financial consultants Quantum Finanzas in Argentina.The permanent council of the Organization of American States was due to hold an emergency meeting on Monday at Argentina’s request to assess the situation.The case could cloud future restructuring of public debt by encouraging bond holders to reject deals with countries in financial difficulty in the belief that some of them will eventually obtain full repayment.This has led the International Monetary Fund to express concern that the outcome of this case could have far wider implications for the entire debt-market system.A former director of the Argentinian central bank, Javier Gonzalez Fraga, has said that the country is trying to reach agreement with the vulture funds without triggering what is known as the Rufo clause. That stands for Rights upon future offers, meaning the right for a creditor to obtain the terms of the best offer.Since bankruptcy in 2001, Argentina has been paying restructured debts owed to 93 percent of the private creditors, which accepted the 70-percent write-down in 2005 and 2010.Since 2002, Argentina has done well out of exporting agricultural produce at high prices. In 2006, it settled debt owed ot the IMF and last month it reached an agreement with the Club of Paris of official creditors.By Charles Newbery30 June 2014Argentina this week will continue efforts to negotiate a solution with holdout creditors who won a U.S. court battle to collect full repayment on bonds leftover from a 2001 default on $100 billion.The country lost the court battle with the creditors in June, meaning that it must repay them in full when it makes its June 30 payment to the 92.4% of creditors who accepted 30 cents on the dollar in restructures of the defaulted bonds in 2005 and 2010.Argentina tried to make the next payment to the restructured bondholders by wiring $539 million to its accounts in the Bank of New York Mellon, part of a total $1 billion in debt payments due Monday.But U.S. federal judge Thomas Griesa, who is hearing the case, said paying the restructured bondholders would violate his orders to pay the plaintiffs, who rejected two restructuring offers.Griesa told the trustee bank to send the funds back to Argentina, a move that also prevented the embargo of the money by the plaintiff creditors, among them a hedge fund of American billionaire Paul Singer.Griesa ruled in 2012 that Argentina must repay the plaintiff creditors at the same time that it pays the restructured bondholders, a ruling based on pari passu, an equal treatment of creditors clause in the contracts of the bonds.Argentina’s subsequent appeals failed, raising the threat of default on the restructured bonds.Griesa, however, called on both sides to sit down for talks, which started Friday.In yet another full page advertisement in the Washington Post over the weekend, the government accused the judge of trying to force Argentina into default, and vowed to make the debt payments on time.Argentina has a 30-day grace period for payment on the restructured bonds, or until July 30.“The ball has returned to Argentina’s side,” Eugenio Bruno, a debt renegotiation specialist at a law firm in Buenos Aires, said on Radio Ciudad after Griesa’s latest decision. He said Argentina cannot take action against the Bank of New York Mellon for failing to carry out distribution of the bond payments because there is no legal instance that is higher than the court order.Bruno said a solution can only now be found in negotiations with the holdouts.Argentine President Cristina Fernandez de Kirchner has said she is willing to negotiate a solution, but she said that it must be fair and equitable for 100% of the holders of bonds from the 2001 default.The lack of a solution likely will keep bond and stock markets volatile.But if a solution is found, this could spur buying of local assets as it would put behind a long-running impediment for the country to return to global financial markets for the first time since the default.With less monetary expansion, there could be a slowdown in the 30% inflation rate, something that already is happening but because of a cutback in demand as the economy contracts.The government will report April economic activity Monday as well as May consumption of public services and construction activity. Out the next day is a report on June tax collections.16. ARGENTINA’S DISPUTE WITH ‘HOLD-OUT’ CREDITORS ENTERS FINAL STAGE BUT NEGOTIATED SOLUTION TO AVOID TECHNICAL DEFAULT STILL FEASIBLE (IHS Global Insight Daily Analysis)By Carlos Caicedo30 June 2014In a new twist in the dispute between Argentina and ‘hold-out’ creditors, on Friday 28 June, New York judge Thomas Griesa declared illegal Argentina’s attempt to pay USD832 million to restructured bondholders, three days ahead of when it was due. On 27 June the Argentine government ordered the central bank to transfer the money to the Bank of New York Mellon, which acts as a fiduciary agent. The judge blocked the payment as it was at odds with previous rulings. The payment was due on 30 June, but under Griesa’s 16 June ruling, Argentina is forbidden from paying the bondholders of restructured debt unless it also pays the ‘hold-outs’. The latter refused to join the restructuring of debt defaulted in 2001 to which 93% of bondholders adhered. Argentina’s claims that if it abides by Griesa’s ruling it would have to pay USD15 billion in total, depleting its foreign reserves and forcing it into default again.By trying to make the payment three days before it was due Argentina sought to show the markets that it is willing to pay, but it could not do so because of Judge Griesa’s intransigency.Significance: There is a 30-day grace period for Argentina to honour its obligations; this means that technical default would formally occur on 31 July if an agreement between the two sides is not reached by then. Despite the rhetoric, which is most certainly aimed at a domestic audience, Argentina has reluctantly accepted to enter negotiations with the ‘holdouts’. This in line with Argentina’s desperate efforts to put the default saga behind it and re-enter international capital markets. The recent decision to compensate Spanish energy firm Repsol and an agreement with the Paris Club (an informal group of financial officials from 20 of the world’s biggest economies) over defaulted debt point to that direction. Judge Griesa has already appointed a mediator and has urged both sides to reach an agreement. This would be a highly complex negotiation, but indications so far suggest that a negotiated solution is still feasible if both sides show sufficient flexibility.17. THESE TWO DEBT PAYMENTS MAY BE HEARD AROUND THE WORLD; BOND-MARKET PARIAHS ARGENTINA AND PUERTO RICO ARE ON WATCH BY INVESTORS (MarketWatch)By Ben Eisen30 June 2014NEW YORK — Investors are intently watching two separate stories in the bond market Monday that could have rippling effects, challenging the traditional notions of how bonds are paid.Argentina is expected to enter technical default for the second time in less than 15 years as the pariah of the debt markets negotiates with creditors in the wake of a Supreme Court ruling mandating payouts to a group of hedge funds. The South American nation’s negotiations are already rewriting the rules of sovereign debt restructuring.Separately, a Puerto Rican agency is on watch for a potential default Tuesday after the U.S. commonwealth passed a law allowing its public corporations to restructure their municipal bond debt last week. Puerto Rico’s bonds are held in a wide array of municipal bond funds because of their exemption from federal, state, and local taxes, which means a default could portend broader pain in the market for local government bonds.Cry for me, ArgentinaArgentina has for years been locked in a legal battle with a group of hedge funds that refused to take an earlier restructuring deal on bonds that defaulted in 2001. Investors, led by Paul Singer’s NML Capital, have demanded to be paid in full due to a clause in Argentine bond documents that says the country can’t pay some bondholders without paying the others, called pari passu.The country’s leadership has called these investors “vulture funds,” a reference to the tactic of buying up distressed debt at low prices and taking steps to enhance the payout. The country has sought to forego payments to the holdouts while paying the rest of the creditors — and it has generated a lot of publicity in the process. The nation has said it cannot afford to pay the vultures while also paying the investors who accepted the restructuring deal years ago.The case has been making its way through U.S. courts for years, but the Supreme Court handed the hedge funds a major victory earlier this month when it declined to take up the case. That left in place a lower court ruling mandating Argentina must pony up the money to Singer & Co.Argentina has a payment due on its restructured debt on June 30, but if it can’t work out a deal to pay the holdouts, it must miss the Monday deadline to pay the restructured bonds. That triggers a technical default, setting in motion a 30-day grace period before it becomes a full-fledged nonpayment.The government tried to deposit money in a fund to pay on the restructured bonds last week, but a federal judge rebuffed that action, saying that it can’t pay on the restructured bonds without making good on the money owed to the holdouts. If those creditors manage to get full payment from Argentina, it may impact the willingness of other sovereign debt bondholders to accept a restructuring in the future.Investors remain hopeful that a deal will be reached. The Argentina Merval stock index dropped sharply in the wake of the Supreme court decision, though it has since rebounded. The index is on track to gain 2.5% this month. Argentine bond prices were stable Monday, according to Dow Jones newswires.Puerto Rico surpriseThe economically beleaguered commonwealth of Puerto Rico took municipal bond investors by surprise last week when it passed legislation that allows the island’s public corporations to negotiate a debt restructuring. These corporations, in particular the Puerto Rico Electric Power Authority, the Puerto Rico Aqueduct & Sewer Authority and the Puerto Rico Highway & Transportation Authority, issued nearly a third of the approximately $73 billion of the island’s outstanding bonds.“This legislation is a reaction to the very real economic and fiscal stress experienced by all Puerto Rico entities since 2006,” wrote Barclays analysts, led by Thomas Weyl, in a report late last week.Puerto Rico is a major issuer in the municipal bond market, selling debt in recent years to increase cash flow and aid in its budget deficit, even amid deteriorating fiscal conditions and population flight. Because many mutual funds hold the island’s junk-rated debt to generate tax-exempt yield, mom-and-pop investors in the muni market have a big stake in Puerto Rico.Read: Puerto Rico’s travails hit muni bond firm that bet bigTwo money management firms that hold a substantial chunk of Puerto Rico debt — Franklin Templeton Investments and OppenheimerFunds Inc. — both tried to block the law. Ratings analysts who dropped the agency debt ratings last week, said the law elevates other creditors like pensioners and public employees above bondholders.Puerto Rico must make debt payments on its PREPA bonds on July 1. The island insists that it is willing and has the ability to pay on its debt, but investors are on edge.“The law is potentially most imminently applicable to PREPA, which faces significant liquidity needs with near-term maturities of large bank borrowings,” said analysts at Moody’s Investors Service, led by Emily Raimes.One tranche of PREPA debt maturing in 2028 dropped in price to 45 cents on the dollar after the law’s passage, from 53 cents before. The debt yielded nearly 15% on Friday.18. ARGENTINA ECONOMY STAGES APRIL UPTICK, FAILS TO DISPEL RECESSION FEARS (Dow Jones Institutional News)By Ken Parks30 June 2014BUENOS AIRES–Argentina’s economy managed a small uptick in April, though few analysts expect a quick recovery for an economy that is widely believed to be in recession.The government said Monday that its monthly economic-activity indicator for April rose 0.6% from the previous month, but contracted 0.5% from April 2013.The indicator, known by its Spanish acronym Emae, includes most of the components used to calculate quarterly gross domestic product.Based on government figures, which show two consecutive quarter-on-quarter contractions, the economy is in a recession, says economist Fausto Spotorno.“It’s going to continue like this all year,” says Mr. Spotorno, an analyst at Orlando J Ferreres & Asociados. The consulting firm, known as OJF, expects the economy will shrink 1.5% in 2014.Local consulting firm Consultora Ledesma, which forecast a 0.2% drop in economic activity in April, expects GDP to fall 0.5% this year.“We are on the border of entering our third recession in six years,” says Gabriel Caamaño, a Ledesma economist.Argentina’s once fast-growing economy has been walloped by a toxic cocktail of double-digit inflation, sluggish trade with Brazil, and foreign-currency shortages that make it harder for companies to import materials and equipment.The government’s decision to devalue the Argentine peso 20% in January and increase benchmark interest rates to almost 30% has also crimped growth, though those measures were successful in stopping a run on the central bank’s depleted foreign-currency reserves.GDP contracted 0.8% during the three month period ending March 31, marking the second consecutive quarter-on-quarter contraction in the economy. GDP shrank 0.5% in the fourth quarter of last year.President Cristina Kirchner has tried to revive growth by capping consumer-lending rates and offering inexpensive car loans. Those and other measures should lead to a recovery in the second half of the year, Cabinet Chief Jorge Capitanich said last week.The auto industry, the linchpin of Argentina’s manufacturing sector, has been especially hard hit by slowing demand at home and in top trade partner Brazil. Production fell 22% on the year to 257,519 vehicles in the January-May period. In an ill omen for the broader economy in May, car and truck production fell 14% that month from the previous year.OJF forecasts a 2.5% drop in economic activity in May as a record soybean harvest failed to offset weakness in the industrial sector. Government data for that month won’t be published until late July.Shane Romig contributed to this article.Corrections & AmplificationsThis item was corrected on June 30, 2014 at 2220 GMT to reflect that Argentina’s government said that its monthly economic-activity indicator contracted 0.5% from April 2013. The original version incorrectly reported the indicator contracted that amount from April 2014 in the second paragraph.30 Jun 2014 18:31 ET Correction to Argentina Economy Stages April Uptick StoryArgentina’s government said that its monthly economic-activity indicator contracted 0.5% from April 2013. “Argentina Economy Stages April Uptick, Fails to Dispel Recession Fears,” at 5:10 p.m. ET, incorrectly reported the indicator contracted that amount from April 2014 in the second paragraph.By Chris Reidy1 July 2014Genzyme said Monday that regulators in Argentina have approved Lemtrada, its drug for adult patients with relapsing multiple sclerosis.The treatment, which has not yet received regulatory approval in the United States, has won support in the European Union and nations such as Mexico, Australia, and Canada.More than 2.3 million people worldwide have been diagnosed with MS, including approximately 8,000 people in Argentina, Genzyme noted in its press release.Genzyme’s application for US approval was rejected by the Food and Drug Administration in December. At the time, the FDA called into question the integrity of clinical trials and cited the risk of potentially serious side effects. In May, Genzyme said it had resubmitted the application after discussing the outstanding issues with the agency.The potential for Lemtrada was among the reasons why French drug giant Sanofi SA acquired Cambridge-based Genzyme in 2011 for $20.1 billion.As part of that deal, Sanofi agreed to reward former Genzyme stockholders if the drug achieved certain milestones in the US market regarding approval and sales.20. JURGEN KLINSMANN’S YODA — CESAR LUIS MENOTTI’S AGGRESSIVE IDEAS HAVE INSPIRED COACHES ALL OVER, INCLUDING THE U.S.’S (The Wall Street Journal)By Jonathan Clegg1 July 2014The U.S. national soccer team’s dramatic run to the 2014 World Cup knockout round has thrilled and captivated Americans across the length and breadth of the country.But some 5,000 miles away, in a quiet corner of Buenos Aires, it has also brought a glimmer of satisfaction to an elderly Argentine with wild gray hair, thick sideburns and a profound craving for cigarettes.His name is Cesar Luis Menotti, and to soccer fans world-wide, he is known as the charismatic, chain-smoking coach who led Argentina to its first World Cup triumph in 1978. Less known is the role he has played nearly four decades later as tactical guru, inspirational mentor and coaching swami to U.S. coach Jurgen Klinsmann.As the Americans face Belgium on Tuesday for a spot in the quarterfinals, their progress in Brazil owes an outsize debt to a 75-year-old coach known as El Flaco (the thin one).For more than 40 years, Menotti has been the standard-bearer for a wide-open brand of attacking soccer. His central belief is that the key to victory isn’t defensive organization or keeping hold of the ball, but trying to score as many goals inside 90 minutes as humanly possible.His ideas have influenced the likes of Jorge Valdano, Marcelo Bielsa and Pep Guardiola, who made a pilgrimage to Argentina to visit Menotti before becoming head coach at FC Barcelona.But Klinsmann may be his most devoted disciple. Ever since he played under Menotti during a brief spell at the Italian club Sampdoria in 1997, Klinsmann has been a champion of his attack-attack-attack vision of the game.During his coaching career, he has sought out Menotti’s advice. In separate stints with Bayern Munich and the U.S. team, Klinsmann hired Martin Vasquez, one of Menotti’s former players, to be his assistant coach.“Every coach I worked with had an influence on what I am doing today,” Klinsmann said, “and I had some phenomenal coaches.”It is no exaggeration, though, to say that nearly every aspect of Klinsmann’s coaching philosophy bears the imprint of Menotti.“There was this chemistry between the two of them,” said Danny Dichio, a teammate of Klinsmann on Menotti’s Sampdoria squad. “With Menotti, it was a whole new approach, not just tactically, but even down to the training. Jurgen was like a sponge.”As Germany’s coach in the mid-2000s, Klinsmann transformed a squad long known for its defensive style of play into a fast, freewheeling side that racked up 14 goals in seven games and reached the semifinals of the 2006 World Cup.Granted, no one is going to confuse Klinsmann’s U.S. team with the Argentina squad that Menotti guided to World Cup glory. But there are signs that the same positive style of play is taking hold.In its opening two games here against Ghana and Portugal, the U.S. had 23 shots and scored four times. “He has the wish to create an offensive team,” said Mario Kempes, a member of Argentina’s 1978 team, of Klinsmann. “It’s difficult because he can only use the players that he has at his disposal, but you can see the idea is there.”Even Klinsmann’s commitment to developing a distinctly American style of play evokes Menotti, whose success in the 1970s came from blending modern concepts and techniques with a traditional Argentine brand of soccer known as La Nuestra.“This is the key for Menotti,” says Kempes, now an analyst for ESPN. “You can only succeed by playing in the way which comes naturally to you. For Argentina, this means quick passes, running with the ball and scoring goals.”The shared belief in the benefits of attacking soccer is far from the only link to Menotti. His influence also extends to Klinsmann’s work on the training field.In a sport usually seen as free-flowing and spontaneous, Menotti introduced the idea of pre-rehearsed moves to the training field. His drills involved endlessly repeating specific patterns of play, which were invariably designed to spread the ball out wide and get as many players as possible charging into the penalty box.Brad Evans, a U.S. midfielder, said Klinsmann has brought those same sequences to Team USA training sessions. “There’s six or seven [patterns] that we work on in any given day,” he said. “And the big thing with those pattern plays is getting a late runner in the top of the box and making sure we’ve got numbers in the box.”On some occasions, Klinsmann has even turned to Menotti for tactical pointers ahead of a key game.On the eve of Germany’s round-of-16 showdown with Sweden at the 2006 World Cup, Menotti met with Klinsmann and advised him to instruct midfielder Torsten Frings to fall back into the defensive line to combat Sweden’s dangerous counterattack. Germany dominated the game and won 2-0 as Sweden managed just two shots.The success of the U.S. team under Klinsmann is in some ways a vindication for Menotti, whose attacking philosophy fell out of favor as defensive soccer took hold of the game more than two decades ago. Despite leading Argentina to its first World Cup and the under-20 championship 12 months later, Menotti was fired after failing to advance beyond the second round at the 1982 tournament in Spain.He returned to club soccer and had brief stints at FC Barcelona, Atletico Madrid and Boca Juniors, but encountered little success. Menotti had surgery to remove a tumor on his lung in 2011 and he hasn’t coached again — or smoked again — since.It isn’t known whether Klinsmann dialed up Menotti to exchange ideas ahead of this World Cup, but the Argentina coach surely would have had some useful advice.Klinsmann kicked up a storm when he omitted Landon Donovan from his squad for the tournament, but it is unlikely that Menotti would have been impressed. In 1978, he was vilified in Argentina for his decision to leave out a 17-year-old named Diego Maradona. He was only forgiven when he lifted the trophy.“This is one thing every coach can take from Menotti,” Kempes said. “If you win the World Cup, no one can criticize you.”