Argentina in debt default, after no deal with creditors

Argentina in debt default, after no deal with creditors

Thursday, July 31, 2014 12:40 am

Argentina failed to reach an agreement with hedge fund creditors after two days of debt negotiations in New York, Economy Minister Axel Kicillof said Wednesday, as Buenos Aires was declared in default.

“They were trying to impose on us something illegal,” Kicillof alleged. “Argentina is prepared to dialogue and seek consensus. We are going to seek a fair, balanced and legal solution for 100 percent of our creditors.”

It was the second time in 13 years Argentina has been ruled in default, and served as a bad omen for the success of a marathon negotiation underway in New York with the stubborn creditors.

Argentina had deposited the $539 million  — for payment to those bond holders who had accepted a write-down in deals reached in 2005 and 2010 — in a bank account when it was due at the end of June.

But a New York judge blocked the bank from forwarding the payment to the restructured creditors unless it also paid two US hedge funds the full value of their bonds, $1.3 billion, at the same time.

Argentina and these funds — NML Capital and Aurelius Capital Management — have spent the last two days locked in talks in New York with a US court-appointed mediator to try a set a deal on payments before the expiration of a 30-day grace period.

S&P’s designation of “selective default” acknowledges that Argentina is current on payments to some creditors and is probably able to make some payments on the debt it has defaulted.

It also said it could remove the default label once the country makes the payment on the restructured bonds.

These funds bought Argentine debt cheaply when Buenos Aires was in difficulty, and refused to accept a write-down when Latin America’s third-largest economy defaulted in 2001.

More to come

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