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Judge tells Argentina to resume talks

by New York Times News Service on August 02, 2014 10:09 AM

NEW YORK — A lawyer for Argentina told a federal judge Friday that the nation had lost faith in the mediator appointed to work with a group of hedge funds that hold the country’s bonds.

The lawyer, Jonathan Blackman, pointed to a statement issued by the mediator, Daniel Pollack, on Wednesday that said Argentina was in “imminent default.” That statement, Blackman said, was “harmful and prejudicial,” and he asked that Pollack be replaced.

But the judge, Thomas P. Griesa of U.S. District Court in Manhattan, rejected the request and said talks would have to continue. But whether Griesa and Argentina’s intentions are aligned is another matter.

On Wednesday, Argentina slipped into its second default in 13 years after missing a regular bond payment. The news sent Argentina’s bonds and stocks into turmoil Thursday and Friday.

For years, Argentina has been battling a group of hedge funds that hold bonds that it defaulted on in 2001. The country eventually exchanged most of its bonds for discounted ones, but these investors refused to participate in the exchange, earning them the title of holdouts.

In 2012, the battle reached a pitch when Griesa ruled that Argentina could not continue to pay the exchange bondholders without also paying the holdouts.

This week, last-minute mediated talks between the holdouts and a delegation of Argentine officials that included Axel Kicillof, the economy minister, broke down, and Argentina missed a deadline to make a payment to its exchange bondholders.

Ratings agencies downgraded its debt in response.

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