UPDATE 2-Wary banks struggle for deal with Argentine debt holdouts
(Adds mediator expects more talks, pro-government rally)
By Joan Magee and Daniel Bases
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, dampening market hopes for a swift end to the country's latest debt default.
Citigroup, Deutsche Bank, HSBC and JP Morgan 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, sources told Thomson Reuters IFR.
Those negotiations are taking place parallel to faltering talks between Argentina and the holdouts led by Elliott Management Corp and Aurelius Capital Ltd.
Daniel Pollack, the U.S. court-appointed mediator overseeing the negotiations, told Reuters he expected more meetings with both sides, though he did not say when.
Monday's offer from the banks to the holdouts, who bought the bonds on the cheap during and after the country's 2001-2002 economic crash, remained far below the 80 cents first proposed last week.
"These are not fully-baked proposals," a source from one holdout firm told IFR.
Local Argentine bonds fell more than 1 percent on the day and the peso currency weakened on pessimism over a potential deal. Continuación...