Two months into a new year expected to bring progress, Argentina and the hedge funds it brands vultures are still far apart in a battle over bonds that has put the country back into default.
The two sides are in New York district court Tuesday over whether the country can pay a certain class of creditors while it still does not pay off the hedge funds as ordered by federal Judge Thomas Griesa.
Meanwhile the mediator appointed by Griesa to negotiate an end to the decade-old case says he can't move if Buenos Aires does not even respond to offers.
But Argentina says it won't negotiate unless all of the "holdouts" who refused to join its 2010 debt restructuring are covered by any deal with the hedge funds, NML Capital and Aurelius Capital Management.
The holdouts, including dozens of so-called potential "me-too" bondholders who have yet to join any litigation, could potentially claim up to $20 billion, an amount it cannot afford to pay, Buenos Aires says.
- 'Waiting for Argentina' -
The December 31 expiration of the "RUFO" bond contract clause was supposed to open the door toward resolving the fight that began when Argentina defaulted on $100 billion in debt in 2001.
In the restructuring completed five years ago, around 92 percent of bondholders accepted a huge writedown.
But NML and Aurelius sued for full payment, demanding $1.3 billion for the bonds they bought post-default at pennies on the dollar, now $1.7 billion including accrued interest.
In a decision that sparked turmoil in the politically fraught world of sovereign debt restructurings, in November 2012 Griesa ruled in the hedge funds' favor. He also declared that Argentina could not pay any other creditors unless it paid them first.
Argentina has lost appeals of Griesa's ruling all the way up to the Supreme Court.
It has still refused to pay the hedge fund holdouts -- in part because it cannot reach a compromise on the amounts, and in part, it said, because of the RUFO clause, which could have allowed restructured bondholders to reclaim what they gave up in the 2010 deal if NML and Aurelius are fully paid.
With Griesa's court meanwhile blocking other payments, on July 31 last year Argentina fell into default again with restructured bondholders.
Once the RUFO clause lost effect at the start of this year, expectations were that negotiations might resume.
But on February 19, the court-appointed negotiator, lawyer Daniel Pollack, released a statement saying that even though NML proposed to restart talks, after two weeks "the Government of Argentina has neither accepted nor otherwise responded to the invitation."
Buenos Aires lashed out at Pollack as biased. But it says another issue stands in the way: that dozens of the so-called "me-too" holdouts could launch their own litigation to cash in on a deal reached with the two hedge funds.
Some of them have already moved to be included in NML's case, but not all, noted Argentina's ambassador to the United States, Cecilia Nahon.
"The fact that the RUFO clause has expired does not mean that Argentina will negotiate an agreement that may mortgage its future," she told AFP.
"Argentina wants to reach an agreement with 100 percent of its bondholders, but not under extortive conditions."
A source close to the plaintiff group in the case though said Argentina now has to demonstrate it truly wants to reach a deal.
The push to have 100 percent of me-toos involved is "an excuse for not negotiating," he alleged. "No restructuring has ever involved 100 percent of creditors."
But even if that issue could be solved, the two sides remain far apart on what would be a reasonable deal. Buenos Aires says it has offered the hedge funds a "fair" deal that would give them 300 percent profit; the funds want a 1,600 percent gain, it accuses.
The funds say no offer yet has been adequate.
But meanwhile pressure is building on Argentina because restructured bond creditors are blocked by the court from receiving payments, even as Buenos Aires places the owed funds in escrow.
Nahon says the creditors have not made aggressive moves for payment because they trust Argentina intends to pay.
But how long they will remain patient remains in question.
"This is the first time a country has the resources to pay, the willingness to pay, and has timely made the payments to its creditors, yet because of an absurd legal ruling instigated by vulture funds its bondholders cannot collect their payments," Nahon said.