Argentina’s economy minister led a last-gasp effort Wednesday to strike a deal with U.S. creditors that would prevent the South American country from slipping into default.
With a midnight deadline looming, Minister Axel Kicillof arrived at the New York City office of a mediator appointed by a federal court to help close a deal with lawyers for U.S. hedge funds demanding payments of some $1.5 billion.
A deal seemed more likely with news that representatives of Argentina’s private banks association, ADEBA, were set to arrive with an offer to buy out the debt. In return, the court would allow Argentina to make a $539 million interest payment to other bondholders before midnight, which would allow the country to avoid default.
The hedge fund investors are demanding that Argentina make full payment on debt that it defaulted on in 2001, even though the investors bought rights to that debt at less than face value. Unless Argentina does so, a U.S. court blocked it from making the interest payment owed to bondholders who separately agreed to a restructuring plan with the country.
Argentine bonds surged to their highest level in more than three years on the possibility that Argentina will reach a deal with the holdout creditors by the midnight Wednesday deadline. Argentina’s Merval stock index also climbed more than 6.5 percent in midday trade on a likely deal.
For years, the Argentine government has called the hedge fund creditors “vultures” for picking on the carcass of its record $100 billion default in 2001. But the mediator said the two sides were making “a frank exchange of views and concerns,” although he warned that divisive issues remained unresolved.