Argentina returns to the negotiating table; could avoid default

Possibly avoiding another financial catastrophe, Argentina’s economy minister resumed negotiations to solve the South American nation’s financial crisis without going into default late Wednesday morning.

SEE ALSO: Argentina faces imminent default on foreign debt

Minister Axel Kicillof arrived Wednesday at a New York City office building for last-minute negotiations after having his first face-to-face meetings Tuesday evening with lawyers for so-called ‘vulture funds,’ which are U.S. hedge funds that banked on Argentina’s failure to pay its foreign debt in order for them to make a profit.

The Associated Press reported, “A court-appointed mediator described the meetings as ‘a frank exchange of views and concerns’ but also said divisive issues remained unresolved.”

Argentina could have avoided running into this deadline were it not for the vulture fund holdouts: The government of Buenos Aires proposed a deal to bondholders where they’d get regular interest payments for a dramatic 70% reduction in the value of their bonds. While nearly all creditors would go on to accept such a deal, the vulture funds held out, asking for full payment under original terms.

Two separate U.S. Supreme Court rulings require the hedge funds to be paid roughly $1.5 billion for bonds they bought on the cheap if Argentina makes scheduled payments to bondholders who swapped their bonds at lesser value after Argentina’s 2001 default.

A midnight Wednesday deadline to avoid a default has put added pressure on negotiators. A judge ordered the around-the-clock negotiations, saying “real people will be hurt” by a default.

President Cristina Fernandez has been criticized for launching an attack campaign against what she calls “extortionist” policies, along with economy minister Kicilof, instead of coming to an agreement with the U.S. creditors.

SEE ALSO: Vulture funds rip Argentina during crisis