Sunday, 23 October 2016
Last updated 2 days ago
Jul 17 2014 | 11:03am ET
Argentina is two weeks from its second default in 13 years. Or is it?
The country—barred by a U.S. judge from paying its restructured debt unless it pays two hedge-fund holdouts from its 2001 default $1.5 billion—argues that it isn’t facing a July 30 deadline at all. President Cristina Kirchner said yesterday that only Argentina itself could declare a default, not a creditor or foreign judge.
“Only the country that does not pay can declare default or the cessation of payment,” Kirchner said at an emerging-markets summit in Brasilia.
What’s more, Kirchner and other Argentina officials noted, Argentina has made the $539 million payment due on June 30. It’s just that its custody bank, Bank of New York Mellon, hasn’t passed it on to bondholders due to U.S. District Judge Thomas Griesa’s order.
“Argentina has paid its debt and will continue to pay its debt,” she said.
“There cannot be a default when the debtor is paying,” Cabinet Chief Jorge Capitanich added. “Argentina pays, it has not defaulted. There is no possibility of entering default because Argentina pays in good faith. The vulture funds are the ones acting in bad faith by not supporting Argentina’s request for a stay.”
Argentina has refused to negotiate directly with the holdouts, led by Elliott Management and Aurelius Capital Management, unless Griesa suspends his ruling preventing the June 30 payment from being made. Griesa has already rejected that request, but next week will take up a plethora of other matters, including the $539 million sitting at BNY Mellon.
Argentina transferred the money to the bank in defiance of Griesa’s orders, and he told BNY Mellon to simply return it. But the bank argues that such a move would open it to litigation from both Argentina and the restructured debtholders.
Griesa is also expected to address six bondholders’ requests for clarification, including whether holders of Argentine bonds issued under British and Japanese law can be paid.
Other restructured bondholders are seeking a list of their fellows in an effort to smooth a possible settlement. Argentina’s exchanged debt includes a rights against future offers clause that entitles holders to any better deal the country gives the holdouts. The clause does not expire until the end of the year, but some restructured bondholders wish to waive the clause to ensure they continue getting paid.
Without such a waiver, Argentina could be facing about $13 billion in additional claims, The Wall Street Journal reports. That’s only about one-tenth the $120 billion Argentina says it could face, an amount that would push it into bankruptcy.
At yesterday’s summit, Kirchner accused the hedge funds of a “massive speculative attack” on the country and of wanting “the restructuring to collapse.” Capitanich alleged that Elliott and Aurelius are attempting “the appropriation of the country’s natural resources.”