Argentine Banker Said to Propose Accord to Avert Default

By Camila Russo

July 30 (Bloomberg) -- Atul Lele, chief investment officer at Deltec International Group, and Bill Janeway, managing director at Warburg Pincus, discuss how a default by Argentina’s government could impact emerging markets and global economies. They speak on “Bloomberg Surveillance.”

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A top Argentine banker and former Economy Ministry official arrived in New York today to make a last-minute proposal aimed at averting the country’s second default in 13 years.
Sebastian Palla, the head of investment banking at Banco Macro SA in Buenos Aires, will present a proposal from members of the Adeba local banking association to buy defaulted bonds from investors who won a lawsuit for full repayment, said a bank official who asked not to be identified because she isn’t authorized to speak publicly about the plans. An agreement would allow Argentina to continue paying interest on its restructured bonds as a deadline to avoid default expires today.

Argentine bonds surged to a three-year high on speculation that government officials and holdout creditors will reach an agreement today. The Merval stock index rallied and the peso gained in the unofficial market investors use to skirt currency controls.
‘The expectation is that Argentina will reach a resolution today,’’ Patrick Esteruelas, a senior analyst at Emso Partners Ltd., said in a telephone interview. “Kicillof wouldn’t have traveled to New York, taking the unprecedented step to meet face-to-face with the holdouts, and spend all that political capital, to go back to Buenos Aires empty-handed.”

Photographer: Peter Foley/Bloomberg

Pablo Lopez, Argentina's finance secretary, exits after debt talks in New York, on July 24, 2014.

Related:

• How Argentina’s Default May Trigger $29 Billion in Claims
• Argentines Shrug Off Default Prospect as No 2001 Repeat Seen

Palla was head of Argentina’s private pension funds before they were nationalized in 2008 and previously worked at the Economy Ministry from 2003 to 2005 as undersecrtary of finance, where he took part in the nation’s first debt restructuring after its 2001 default. Other members of the banking group include Grupo Financiero Galicia SA, Banco Hipotecario SA and Banco Mariva.

12 Hours

Economy Minister Axel Kicillof entered a Manhattan office building this morning to continue meetings after 12 hours of talks yesterday. After weeks of avoiding direct talks with hedge funds that successfully sued the country for full repayment of $1.5 billion on defaulted debt from 2001, officials met face-to-face with representatives for the holdouts for the first time last night, court-appointed mediator Daniel Pollack said in an e-mailed statement.
As part of the same case, Paul Singer’s NML Capital and other holders of defaulted Argentine bonds urged a judge to deny a bid by holders of the country’s Euro-denominated bonds to delay court orders that forbid Argentina from servicing the debt before reaching an accord with the hedge funds that are trying to collect more than $1.5 billion.

Photographer: Don Emmert/AFP via Getty Images

Axel Kicillof, Argentina's minister of economy, speaks to the media in New York.

Any default by Argentina could trigger bondholder claims of as much as $29 billion, equal to the nation’s foreign-currency reserves. The economy, already headed for its first annual contraction since 2002 amid 40 percent inflation, may shrink by an additional 5 percent in a default scenario as Argentines scrambling for dollars cause the peso to weaken and activity to slump, according to Bank of America Corp.
Bonds maturing in 2033 surged 10 cents on the dollar to 95.5 cents at 2:34 p.m. in Buenos Aires, reaching the highest price since November 2010. The Merval stock index jumped 6.1 percent to a record high.