The US judge presiding over Argentina's bitter dispute with hedge-fund creditors ordered the two sides to hold new negotiations and called for an end to "mistrust" at a hearing here today.
Argentina needs to strike a deal with the two US hedge funds, whose legal battle against its debt restructuring has blocked it from paying bondholders who agreed to take a 70-percent write-down after the country's 2001 economic crisis.
It missed a USD 539 million payment due Wednesday after 11th-hour talks with the hedge funds which Buenos Aires calls "vulture funds" failed to break the impasse.
US District Judge Thomas Griesa, who has blocked Argentina from servicing its restructured debt without also repaying the hedge funds the full USD 1.3 billion it owes them, ordered the litigants to hold new talks.
"Let's go back to work," Griesa said.
He rejected Argentina's request to change the court-appointed mediator charged with marshaling the negotiations, attorney Daniel Pollack, and called for more trust.
The Argentine government has accused Griesa and Pollack of "incompetence" and called the judge an "agent" of the two hedge funds, NML Capital and Aurelius Capital Management.
"Let's cool down any idea of mistrust," Griesa said.
Argentina says paying the hedge funds in full could expose it to claims for up to USD 100 billion from "exchange creditors" who accepted a write-down but are entitled to equal treatment under what is called a Rights Upon Future Offers, or RUFO, clause.
Sources close to the case say JP Morgan and other banks are in negotiations with the hedge funds to settle the dispute by buying some or all of their bonds.
JP Morgan has declined to comment.
"We cannot have favorable expectations because he has always had a biased view," Argentine cabinet chief Jorge Capitanich told journalists in Buenos Aires.
Argentina denies that it is in default, since the payment in question is currently sitting in a Bank of New York account, frozen by Griesa's ruling.
But declarations to the contrary continued to pile up in the financial world.
