By Charles Newbery
BUENOS AIRES, Argentina
Argentina’s government said Thursday that litigating creditors are making threats against the country in a conflict that has pushed the country to a second default in 13 years.
The threats are “irrational,” Cabinet Chief Jorge Capitanich said in a televised press conference.
He spoke a day after Aurelius Capital Management, a hedge fund that won a U.S. lawsuit against Argentina, said it doesn’t expect a solution to the conflict to come from private banks such as J.P. Morgan.
Aurelius said in a statement that it hasn't received a worthwhile offer yet from any of the banks that have approached it.
The banks want to buy the judicial claim that Aurelius and other hedge funds won against Argentina to get paid back $1.5 billion on bonds left over from a 2001 default on $100 billion. A buyout would allow the banks to then ask the U.S. court to allow more time for to negotiate a settlement with Argentina in 2015, making it possible for the government to resume debt payments in the meantime.
The country went into default July 30 on the 92.4 percent of bonds that were restructured from the 2001 default.
The government argued that it couldn’t pay more to the plaintiffs without violating a rights upon future offers clause that would steep it in more than $120 billion in debts stemming from lawsuits from the restructured bondholders.
Based on this clause, Argentina cannot pay any of the 7.6 percent of creditors that held out of the restructurings in 2005 and 2010 to collect more than the 30 cents on the dollar accepted by the 92.4 percent. If that happens, the 92.4 percent can sue for the difference, or up to 70 cents on the dollar.
Aurelius said that Argentina is “hiding behind” this lawsuit concern as a way to avert settlement.
Capitanich shot down such claims as “unfounded” and called the hedge funds a “global mafia.”
While the war of words plays out, economists warn that the country’s economy could fall deeper into recession.
“There is not a panic, but there are concerns of a further devaluation of the peso against the dollar,” said Federico Thomsen, an economist at E.F. Thomsen, an economic and political consultancy in Buenos Aires.
He said these concerns push people to take refuge in dollars on concerns of a worsening economy, higher inflation and a weaker peso.
Indeed, demand for dollars on the black market surged this week, causing the peso to drop to a record low of 13.20 per dollar Thursday from 12.80 Monday.
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