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At a hearing with banks and lawyers in New York, Griesa ordered both sides engage to “work “continuously” to reach a settlement before 30th July, the deadline to pay holders of restructured bonds.
The judge determined that a stay, which would allow Argentina to meet its obligations to those bondholders while continuing to negotiate with the holdouts, was not necessary for an agreement to be reached before the end of the month. Last month Griesa blocked the US$539mn payment in question after Argentina deposited the funds in the Bank of New York Mellon.
Daniel Pollack, the special master appointed by Griesa to mediate the dialogue, called another meeting for tomorrow morning to try and break the deadlock. At today’s hearing, however, Argentine lawyers said that this would be “impossible” without the stay.
Rejecting this argument, Griesa again adopted a tough tone with the Argentine representatives, criticising what he called the government’s “incendiary” rhetoric. In recent days and weeks, both side have been engaged in a public relations battle over the case, including several full-page ads in major newspapers.
Yesterday, the government issued a another statement supporting its application for a stay, which is based on concerns that paying the US$1.5bn to the vulture funds – as ordered by Griesa in November 2012 – would trigger a landslide of other claims that could amount to between US$120bn and US$500bn, far beyond the country’s payment capacity.
This is based on the Right Upon Future Offers (RUFO) clause that was included in the debt restructurings of 2005 and 2010, to which over 92% of bondholders subscribed.
The RUFO clause, which expires at the end of this year, prevents the government from voluntarily making a better offer to that concluded in the restructuring. However, the holdouts, led by vulture fund NMP Capital, say this is not an issue because the US court ruling, which was upheld several times in appeals courts, means the payment is not voluntary.
Judge Griesa called for “sensible steps” to reach a settlement and avoid an Argentine default, which he said would be “most unfortunate.”