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Argentina Wants to Settle With Holdout Creditors

President Says Government Wants Settlement With Creditors Who Didn't Restructure Debt. Argentine President Cristina Kirchner said she wants to reach a settlement with a small group of bondholders suing to collect on defaulted debt and plans to ask a U.S. court for its help in making a deal possible.

A small group of hedge funds are holding out for full payment on bonds caught up in the country's 2001 default. U.S. courts have ruled that Argentina must compensate these creditors or it can't make payments to bondholders who accepted restructured debt in 2005 and 2010. Missing those payments could lead to another default.

In her annual Flag Day speech, Mrs. Kirchner said Argentina would enter talks with the help of U.S. courts. "We only ask they create negotiating conditions that are just and in accordance with the Argentine constitution, laws and contracts we signed with 92.4% of our creditors," Mrs. Kirchner said, referring to investors who accepted the restructured bonds.

The country's restructured bonds jumped during Mrs. Kirchner's speech on Friday, nearly wiping out their losses for the week. The dollar bond maturing in 2033, whose interest payment is due June 30, rose to around 83 cents on the dollar—close to where it traded before the U.S. Supreme Court on Monday declined to review the lower court ruling ordering Argentina to pay the holdouts. They had traded below 75 cents earlier in the week.

Investors "are assigning a greater chance of a real negotiation with holdouts, which would be a big positive," said Jeff Williams, an emerging-markets strategist at Citigroup Inc. in New York. He said negotiation would be the first step for Argentina to regain access to international debt markets.

The president's speech, which analysts said was more conciliatory than expected, underscores her recent efforts to improve relations with investors. It comes after Argentina resolved conflicts with Spanish oil company Repsol REP.MC -0.25%  and agreed to settle almost $10 billion owed to members of the Paris Club of creditor nations. Settling with holdouts also would help YPF, Argentina's state-run oil firm, which is eager to tap international financial markets to fund exploration programs. 

The offer to negotiate comes less than two weeks before Argentina has to make the next interest payment on its restructured bonds, which U.S. courts have said the country isn't allowed to pay unless it also pays the holdout creditors. If Argentina misses the interest payment on June 30, the country sinks into technical default and will have another 30-day grace period to avoid an outright default.

Many holders of Argentina's restructured bonds had expected the country would ultimately soften its stance toward the holdouts. Even if Argentina misses the June 30 payments, investors say they expect Argentine officials will be able to reach a settlement in July and find a way to make up the late interest payments.

"This will have to be resolved one way or the other by the end of July," said Gorky Urquieta, co-head of emerging-markets debt at Neuberger Berman, which manages $247 billion and holds Argentine bonds. He says he hasn't sold the bonds this week because he feels he is adequately compensated for the risk of a default with Argentina's high yields.

Argentina's lawyers will ask U.S. District Judge Thomas Griesa, who issued the original ruling in the case, to create the conditions to reach an agreement that will be "beneficial and equal for 100% of creditors," Mrs. Kirchner said.Argentina is seeking Mr. Griesa's goodwill after her ministers in recent days slammed the judge for trying to unravel Argentina's debt restructurings, also accusing him of bias in the case.

Earlier this week, Argentina's economy minister said the country would take steps to pay restructured bond owners in Argentina under Argentine law. On Friday, Mr. Griesa said this would violate the rules and procedures now in place in New York and prohibited Argentina from making such a move.

In her speech, Mrs. Kirchner referenced the dire condition of Argentina's economy when her husband and predecessor, Néstor Kirchner, took office in 2003, less than two years after the default. Analysts say Argentina is ill prepared for a second default, as high inflation and dollar shortages already have the economy on the brink of recession.

—Taos Turner contributed to this article.

 

Write to Ken Parks at Este endereço de email está protegido contra piratas. Necessita ativar o JavaScript para o visualizar. and Nicole Hong at Este endereço de email está protegido contra piratas. Necessita ativar o JavaScript para o visualizar.

 

 

 

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