Won’t Cry For Thee, Argentina

“Default is not mine” says Cristina

BUENOS AIRES, Argentina (AP) — Argentina risks financial default unless it reaches an agreement with a group of holdout bondholders by Wednesday. Here are the issues at stake:

In 1998, Argentina fell into recession and faced crushing payments on its international debt. As it tried to avoid default in 2001, it arranged a “debt swap,” asking investors to trade in bonds coming due for longer-term ones. The swap, however, failed to resolve Argentina’s troubles. In December 2001, the country declared it would stop making payments on about $100 billion of debt.

Argentina’s government lined up two more swaps in 2005 and 2010, offering existing creditors new bonds worth much less than the old ones. Critics described Argentina’s negotiating style as “take it or leave it.” Most investors accepted — something is better than nothing — and traded in roughly 93 percent of the defaulted bonds.

WHO’S SUING?

Hedge funds began buying Argentina’s bonds as the country slid into crisis and kept adding to their holdings after it defaulted. Some, like NML Capital, refused to participate in the exchanges and held out for a better deal.

These holdouts then turned to U.S. courts, seeking to force Argentina to pay up under terms agreed to when the bonds were first sold, before 2001.

Argentina’s government demonizes the investors as “vulture funds.” ”The vultures feed on carrion, and these fund groups are circling around countries in default or close to default,” said Matthias Carugati of the Management & Fit consulting firm in Buenos Aires.

At least two of these groups are in litigation with Argentina: Billionaire Paul Singer’s NML Capital Ltd., and Aurelius Capital Management.

HOW MUCH DOES ARGENTINA OWE?

U.S. District Court Judge Thomas Griesa in Manhattan ruled in 2012 that the creditors who rejected Argentina’s earlier debt-swap offers deserved to be paid in full — a figure he put at $1.33 billion. With interest, that amount has risen to about $1.5 billion. The creditors say they are due $1.6 billion.

In this puffed-up bubble of a global economy it will be ‘interesting’ to see what happens if both Argentina and Espirito Santo default at the same time.

One Response to “Won’t Cry For Thee, Argentina”

1. aelfheld says:

   July 30, 2014 at 2:02 pm

   As noted, vultures do feed on carrion.

   So it would be reasonable to assume Argentina is dead.