Talks for private deal on Argentine bonds collapse


Talks between a group of global banks and at least one major hedge fund about buying a portion of the fund's exposure to Argentine debt have collapsed, a person familiar with the matter told CNBC, amid concerns that the Argentine government has dug in to its refusal to pay certain creditors what they are owed and may not relent for months to come.

In recent weeks, representatives for NML Capital, a subsidiary unit of the $25 billion hedge fund company Elliott Management, had negotiated with counterparts at JPMorgan, Citigroup, HSBC, and Deutsche Bank about the possibility of buying at least part of NML's position in Argentine government bonds.

Argentina entered a state of default on July 31 after refusing to pay what it owed to NML and certain other creditors, arguing that the group was made up of "vulture" investors whose demands for capital from the economically troubled country were unreasonable.

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The idea behind the bank discussions with NML, people briefed on the matter have said, was that Argentina might look more kindly upon international banks like JPMorgan than it would have on a group of tough-talking hedge funds, and therefore might have been more likely to pay off at least part of the roughly $1.3 billion it owed those bondholders as of late July.

But that thinking changed when it appeared that the Argentine government's own aggressive stance seemed to be hardening. The signs included filing suit against the United States, where the disputed bonds are domiciled, in the International Court of Justice; sharply criticizing both a federal judge and a mediator appointed to broker a solution between the country and NML and some of its other investors; and purchasing a two-page ad in the Wall Street Journal exhorting some of its friendlier bondholders to take action to protect their investments.

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In addition, one of the people familiar with the matter said that the purchase prices for the bonds envisioned by the banks and NML had at times been far apart – ranging from as little as 40 cents per dollar invested to closer to 80 cents per dollar.

Separately, Reuters quoted Argentine holdout creditor Aurelius Capital Management as saying there were no realistic proposals for a solution after talks on a private settlement.

—By CNBC's Kate Kelly. Reuters contributed to this article