Argentina strikes deal with hedge funds

Mediator Daniel Pollack announced in New York on Monday that a deal in principle was struck the day before, for the Argentine government to "settle all claims" by making a multi-billion dollar payment to four hedge funds.

The deal means the country's remaining holdout creditors - NML, Aurelius, Davidson Kempner and Bracebridge Capital - will get paid 75 percent of the amount outstanding on their judgments, including principal and interest.

Analysts said the agreement could help Argentina return to the international capital markets, which it was frozen out of nearly four years ago. That would give a much needed boon to its struggling economy.

"It gives me greatest pleasure to announce that the 15-year pitched battle between the Republic of Argentina and (NML owner) Elliott Management, led by Paul E. Singer, is now well on its way to being resolved," Pollack said in a statement.

"This is a giant step forward in this long-running litigation, but not the final step," Pollack added.

Win for Macri

Sunday's deal was the culmination of a promise made by new President Mauricio Macri when he took office in December to resolve the longstanding dispute.

His predecessor Cristina Kirchner refused to bargain with what she called "vultures" picking over the country's stricken debt.

The conflict dates back to 2001 when Argentina defaulted on nearly $100 billion in debt.

Although nearly all the country's creditors eventually accepted to write off 70 percent of their bonds in a restructuring exercises, a small minority of creditors refused.

One of them, hedge fund Elliott Management later bought up the debt and sued Buenos Aires for full payment on the face value of the bonds.

Government's hands tied

In 2012, the hedge funds won the landmark court battle when a New York judge effectively shut down Argentina's access to capital markets to force it to pay off the restructuring "holdouts."

The saga involved years of court battles, street protests in Buenos Aires, the seizure of an Argentine naval vessel, and increasingly distorted economic policy as the government tried to avoid settling with the holdout creditors. At one point, it even won the backing of the United Nations.

For Argentina, repaying the hedge funds means taking a sizable chunk out of its foreign reserves. Another hurdle to be crossed is that Macri needs to get approval in the National Congress, which is dominated by the opposition.

Analysts said the case raised concerns that during future national defaults, other creditors might take similarly uncompromising positions, undermining the ability to rescue financially stressed governments.

mm/gsw (AFP, AP, Reuters)