UPDATE 1-International banks struggling to cut Argentina debt deal -sources
(Adds Argentine financial market levels, local analyst quote)
By Joan Magee
NEW YORK Aug 12 (Reuters) - International banks are struggling to reach a deal to buy a chunk of Argentine sovereign debt held by New York hedge funds suing the country, sources close to the negotiations said on Tuesday.
Citigroup, Deutsche Bank, HSBC and JP Morgan entered into talks with the funds to help Argentina swiftly exit its second default in just over a decade, which occurred as a result of a drawn-out legal battle with the holdout creditors.
Sources told Thomson Reuters IFR that the banks last week offered the holdout hedge funds 40 cents on the dollar for the roughly $1.66 billion of bonds, including interest, and raised the offer to 50 cents on Monday.
That price is far below the 80 cents first proposed last week.
The hedge funds, led by Elliott Management Corp and Aurelius Capital Ltd, originally bought the bonds on the cheap during and after the country's 2001-2002 economic crash and are demanding payment at face value.
"These are not fully-baked proposals," a source from one holdout firm told IFR.
Local Argentine bonds fell on the day and the peso currency weakened on pessimism over a potential deal. Continuación...