South America

Argentina will not make a formal offer to settle its dispute with holdout investors in its sovereign debt at its meeting on Monday with a court-appointed mediator, an Argentine daily wrote on Saturday, citing Economy Ministry sources. After a string of adverse U.S. court decisions, Argentina has until the end of July to settle with a group of creditors who refused to accept the terms of its restructurings following its 2002 default on $100 billion of debt.

State-run Caixa Econômica Federa l, Brazil's largest mortgage lender, is considering options to get rid of bad loans and free up capital, including the sale of pools of distressed credit to investors, two sources said on Wednesday, Reuters reported. Up to 3.2 billion reais ($1.4 billion) worth of defaulted loans could be sold to funds that specialize in dealing with distressed assets, the sources said. Alternatives under study include the sale of securities backed by pools of bad loans, according to the first source, who declined to be identified because the matter has yet to be decided.

Argentina’s President Cristina Fernandez de Kirchner has less than a month to choose between two unpalatable options: fulfilling a vow never to pay off creditor hedge funds, or negotiating with them to avoid a rerun of the 2001 debt crisis that forced a predecessor to flee the presidential palace in a helicopter, Bloomberg News reported.

Bank of New York Mellon Corp. must return a $539 million deposit from Argentina intended for restructured bondholders, a U.S. judge ruled, calling the transfer an “explosive action” that disrupted potential settlement talks with holders of defaulted debt, Bloomberg News reported. U.S. District Judge Thomas Griesa in New York has ruled that Argentina can’t pay holders of its restructured debt without also paying more than $1.5 billion to a group of defaulted bondholders, raising the possibility of a new default as the South American nation approaches a June 30 payment deadline.

Governments have a long history of borrowing abroad and not repaying their debts. The first recorded sovereign default was in the 4th century BC when ten Greek cities failed to honour loans from the temple of Delos. Yet there are still no clear rules governing what happens when sovereigns do not pay up, The Economist reported. The murkiness was highlighted this week when Argentina seemed to offer, under duress, to negotiate with the 8% of its bondholders who refused to accept any losses after a huge default in 2001.

Argentina is being pushed toward a new default after a U.S. Supreme Court decision favored holdout creditors seeking payment on bonds it defaulted on in 2001-2002, Economy Minister Axel Kicillof warned United Nations diplomats on Wednesday, Reuters reported. Referring to those creditors as "vulture funds," Kicillof said the June 16 decision by the top U.S. court to deny Argentina the chance to appeal a lower court ruling means it faces an insurmountable payment to all existing bondholders, given it has just $28.5 billion in foreign currency reserves.

Brazil plans to sell billions of dollars worth of offshore oil rights to state-run oil company Petrobras, a move expected to saddle the company with new costs even as its debt soars and it struggles to meet existing production targets, Reuters reported. Shares of Petroleo Brasileiro SA, as Petrobras is formally known, fell in Sao Paulo trading on Tuesday. Preferred shares, its most-traded class of stock, slipped 3.9 percent to a nearly three-week low.

Argentina asked a U.S. judge on Monday to issue a stay of his ruling against the country in its case against "holdout" creditors, as it sought to avoid a new default that would further punish an economy already slipping into recession, Reuters reported. The move is the latest twist in a 12-year-old battle with investors who refused to take part in bond restructurings after Argentina failed to pay about $100 billion of debt in 2002. Without a stay on a ruling by U.S.

Argentina has made a key concession in its long-running dispute with a group of so-called holdout creditors after agreeing to a meeting in New York next week to discuss debt repayments that could help the nation avert a looming default., the Financial Times reported. The holdouts, consistently described as “vultures” by government officials, are made up largely of a group of hedge funds that did not participate in the country’s two previous debt restructurings.

Argentina, looking to skirt a U.S. court ruling forcing it to pay holders of defaulted debt, will seek investor backing for a plan to move the rest of its international bonds into the local market, Economy Minister Axel Kicillof said, Bloomberg News reported. President Cristina Fernandez de Kirchner’s administration has studied “extensively” the process to shift bondholders into the domestic market via a debt exchange and will meet with lawmakers to discuss the plans tomorrow, Kicillof told reporters today in Buenos Aires. At the same time, Argentina will send its lawyers to speak with U.S.