Standard & Poor's just cut Argentina's credit rating to "selective default" — meaning it can pay some debts but not others — after it failed to make the June 30 payment to bondholders who agreed to a debt swap. The two sides are still locked in negotiations with less than seven hours until the midnight deadline.
As the clock ticked past midnight in New York without a legal stay or eleventh-hour deal, Argentina was in technical default on its national debt — its second default in 13 years.
Argentine stock markets are expected to be rocked Thursday morning by the news — as 18 hours of talks over the past two days between the embattled country and a group of holdout bondholders failed to reach a deal.
Argentina has been ordered to pay the group of holdouts — led by New York hedge fund billionaire Paul Singer — $1.65 billion but the country claims it doesn’t have the cash or legal authority to do so.
The country wants to pay its regular, or exchange, bondholders the $539 million in interest it owed them as of midnight Wednesday — and in fact deposited the cash with Bank of New York Mellon — but a Manhattan federal judge has ruled it can’t disperse the cash to the bondholders unless Argentina pays the Singer group, too.
Argentina has called Singer’s group a bunch of “vultures” and vowed never to pay them a dime. That is what set up the dramatic midnight default.
While there are no more settlement talks scheduled, the judge can always order a stay (a group of regular bondholders has requested such a move) or the two sides can meet Thursday and reach a deal.
Meanwhile, though, no such deal exists so Argentina stands in technical default this early Thursday morning — and stock markets in Buenos Aires will be on guard for a possible massive sell-off when they open later today.
Argentina's man with a plan touched down in New York this afternoon to attend the debt talks. Sebastian Palla, the head of investment banking at Banco Macro, will deliver a proposal from a group of Argentine banks to pay off Singer and other holdouts in exchange for a court reprieve, Bloomberg News reported. There are just 10 hours until the deadline...
As negotiations were getting underway, holdout investors filed court papers opposing other bondholders' plea to Manhattan Judge Thomas Griesa for a court stay to avoid a default. Singer's group argues that the other bondholders aren't involved in their legal battle and have no standing to make such a request. Holders of euro-denominated exchange bonds on Tuesday asked the judge to delay a court order that has Argentina on the edge of default.
With just 11 hours to go until the default deadline, Argetina's economy minister, Axel Kicillof, arrives (sans tie) for debt talks with court-appointed mediator Daniel Pollack at his 245 Park Ave. office.
Argentina's banks are circulating an "anti-default" plan that would pay off creditors led by Elliott Management's Paul Singer (shown here) and buy the embattled country more time.
Argentina’s president, Cristina Kirchner, continues to rail against holdout investors and try to rally the people. She posted this tweet last night, which translated means: "... between debtor and creditor, endangering future restructurings of sovereign debt and international financial stability."
... entre deudores y acreedores, poniendo en riesgo futuras reestructuraciones de deuda soberana y la estabilidad financiera internacional.
— Cristina Kirchner (@CFKArgentina) July 30, 2014
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