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Capital markets

Hedge funds willing to negotiate with Argentina over debt

Some of the hedge funds attempting to collect debts from Argentina are ready for compromise, the investors' lawyers have said. The readiness to negotiate may save the South American nation from another default.

Hedge fund investors in Argentina's sovereign debt may be willing to discuss an extension on payments that could save Buenos Aires from a technical default, the bondholders' lawyers said Tuesday.

Attorneys representing the holdout investors, which include Elliott Management's NML Capital LTd and Aurelius Capital Management, said in a letter to a US district judge that their clients would permit Argentina to make a $900 million (660 million euros) payment on restructured debt without first making good on money it owes them.

"Argentina and the Plaintiffs will both have a strong motivation to work out a consensual accommodation, on mutually agreeable terms" if both sides have made substantial progress to settle a legal dispute over the arrears, the holdouts' lead counsel, Robert Cohen of Dechert law firm, said in the letter.

The case stems from Argentina's 2001 default that saw the country forced out of international capital markets.

Nearly every holder of Argentine debt at the time agreed to massive restructuring of those bonds to avoid losing everything, but a small group of hedge funds demanded full payment and successfully sued Buenos Aires.

Now Argentina is struggling to pay back the money it owes to those investors who agreed on the restructuring while at the same time challenging the hedge funds' claims the country owes them $1.65 billion in old state debt.

Cohen said a deal would allow settlement negotiations to continue, but added his clients would need assurances and protections in case talks break down after Argentina pays off the other creditors.

Buenos Aires lost a court battle against the hedge funds in 2012 and was ordered to pay $1.33 billion, but the government has so far refused to comply because it said doing so would open the floodgates to demands from other investors that could total $15 billion - or more than half of its foreign currency reserves.

cjc/uhe (Reuters, dpa)

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