Tags: Argentine | bonds | holdout | default

Argentine Bonds Halt Two-Day Rally After Non-Payment on Debt

Thursday, 31 July 2014 09:45 AM

Argentina’s dollar bonds fell after the country failed to make a bond payment, Standard & Poor’s said the country is in default and holders of debt insurance contracts sought a ruling that they’re entitled to compensation.

While Buenos Aires-based newspaper Ambito reported today that banks including Citigroup Inc. have agreed to buy defaulted bonds from holders including Elliott Management Corp. and pave the way for Argentina to resume paying its debt, Cabinet Chief Jorge Capitanich said in Buenos Aires that the government isn’t in talks with private parties. The bond trustee, Bank of New York Mellon Corp., said today that a U.S. judge’s ruling bars it from making payments to bondholders without a resolution of the dispute with so-called holdout creditors led by Elliott, which claim $1.5 billion.

“While the market is optimistic that a solution will be found in the next few days, execution risk is higher than that during the pre-default situation,” Emiliano Surballe, a fixed-income analyst at Bank Julius Baer & Co. in Zurich, said in e-mailed comments.

Argentine notes due in 2033 dropped 5.87 cents to 89.7 cents on the dollar as of 9.15 a.m. in New York. The bonds had rallied 11.7 cents the previous two days.

Argentina missed its deadline to pay $539 million in interest after two full days of negotiations in New York failed to produce an accord with creditors from its last default in 2001. Ambito reported today without saying how it got the information that holdouts including Elliott agreed to sell bonds for $1.4 billion to banks including Citigroup, JPMorgan Chase & Co. and HSBC Holdings Plc.

CDS Ruling

The International Swaps & Derivatives Association said it has been asked to rule if credit-default swaps will pay out, according to a statement on its website.

Investor focus is now turning to whether holders of Argentina’s $29 billion of foreign-currency bonds issued overseas will demand immediate repayment.

Economy Minister Axel Kicillof told reporters late yesterday that the government couldn’t pay the hedge funds led by Elliott because doing so would require the country to similarly sweeten terms for the investors who went along with the country’s debt restructurings in 2005 and 2010. That stipulation, known as the RUFO clause, could trigger claims of more than $120 billion, Argentina has said. The clause expires at the end 2014.

“This looks like it could now drag out until 2015,” Kevin Daly, who helps oversee $13 billion of emerging-market debt at Aberdeen Asset Management Plc in London, said by e-mail today. “The risk is that it gets pushed out further, or you get an acceleration demand by an exchange bondholder that adds a new wrinkle to the holdout quandary.”

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Argentina's dollar bonds fell after the country failed to make a bond payment.
Argentine, bonds, holdout, default
Thursday, 31 July 2014 09:45 AM
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