Let the Negotiations Begin

Argentina will negotiate with NML. Or maybe it won't. Instead, it will let exchange bondholders swap into local law bonds, in clear defiance of the injunction. Except that this recent order by Judge Griesa forbids the swap and declares Argentina's Economy Minister in violation of the injunction. Well... on second (third?) thought, let the negotiations begin.

The country has sent confusing signals since the Supreme Court rejected its appeal in the pari passu case. Now, however, it seems that negotiations will begin in earnest under the auspices of a special master appointed today by Judge Griesa. Here's the order, which appoints Daniel Pollack (of the McCarter & English law firm) to oversee negotiations. Unlike some other cases involving financially-distressed governments (here's looking at you, Detroit), the special master won't play a quasi-judicial role. The master has no authority to make rulings of any kind, only to supervise settlement discussions.

Perhaps Argentina's somewhat erratic behavior - including essentially forcing Judge Griesa to forbid the debt swap - has been designed to make it seem that the country has been forced to negotiate. The RUFO clause entitles exchange bondholders to participate in any better deal voluntarily offered to holdouts. The clause seemingly excludes settlements and so arguably wouldn't apply, but it can't hurt to be careful. In any event, the prospect of a settlement is a welcome one for Argentina-watchers.