World Economy

Argentina Strikes Deal With US Hedge Funds

Argentina Strikes Deal With US Hedge FundsArgentina Strikes Deal With US Hedge Funds

Argentina has struck a deal to settle with a group of holders of euro-denominated bonds it defaulted on 15 years ago, reaching a major breakthrough in its long-running debt dispute with US hedge funds.

Daniel Pollack, a New York lawyer overseeing the settlement talks, said Tuesday Argentina had reached a deal in principle with the “Brecher Class” of holdout creditors to repay them 100% of the principal and 50% of accrued interest on the bonds they hold, DW reported.

The court mediator also said that the exact number of bondholders covered by the class-action settlement would be known in a few weeks’ time, and that the deal was conditioned on the approval of the Argentine Congress and the lifting of injunctions issued by US District Judge Thomas Griesa in the litigation.

The Brecher group is the fourth holdout creditor group in two weeks to accept a deal with the new government of President Mauricio Macri to settle their claims.

Jason Zweig, a lawyer for the plaintiffs, said he was pleased Argentina had “decided to put this matter behind them,” adding that the offer represented a discount of up to 30% for creditors.

A source in the Argentine Finance Ministry told the Reuters news agency that the deal would show the country’s settlement proposal was “good,” adding that “we hope that there will be more agreements in the coming days.”

After previous governments refused for years to reach a compromise with the holdout creditors, most of them US hedge funds, the country’s new president, Mauricio Macri, has sought to clear out the $9 billion in claims that have blocked the country’s access to global capital markets. Macri has proposed paying $6.5 billion to settle litigation stemming from Argentina’s record $100 billion default in 2002.

  A Gamble

After Argentina defaulted on its massive debt back then, about 93% of its creditors later accepted sharp cuts in the value of their bonds to be guaranteed repayment and help the country restructure its finances.

But a number of US hedge funds have refused to accept the offer, suing Argentina for the full repayment of the bonds they had previously bought up at sharply reduced prices.

In 2012 a New York court decided in favor of the holdouts, ordering the country to repay them in full and blocking it from serving other creditors before the holdouts are satisfied.

Pollack would not give the size of the claims represented by the Brecher Class, who bought some €54,000 ($60,096) worth of Argentine bonds around the time of the default and sued for repayment in 2006. But a settlement with the whole class of holdout creditors holding the same bonds as Brecher could run into the tens of millions of euros.

Still, Argentina’s two main antagonists - NML Capital and Aurelius Capital Management, whom former Argentine president Cristina Kirchner once labeled as “vultures”–have yet to agree to settle their $1.75 billion in claims.