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Argentine Default Looms; Refuses To Negotiate; Admits Next Bond Payment "Impossible"
Zero Hedge ^
| Tyler Durden
Posted on 06/19/2014 8:12:51 AM PDT by SeekAndFind
Argentina's attempt to work around SCOTUS decision in favor of the 'holdouts' was rejected (under anti-evasion orders) last night leaving Argentina no alternative but to threaten to default on its debt. The government called it "impossible" to pay bond service due on June 30, because payment to holders of restructured bonds could not be made unless the 'holdouts' were paid $1.33 billion at the same time (and Argentina's economy minister argues could be up to $15 bn) which the distressed country clearly does not have. For the first time in 12 years, Argentina has agreed to negotiate with the 'holdouts' (has renegged on that negotiation) who refused to participate in two restructurings that followed Argentina's 2002 default but it seems increasingly likely that an even of default looms for Argentina.
Buenos Aires is locked in a 12-year legal fight with creditors who refused to participate in two restructurings that followed Argentina's 2002 default on $100 billion in bonds.
In a televised address to the nation on Tuesday President Cristina Fernandez said Argentina was the victim of "extortion" by the holdouts, but that she was still open to negotiations and insisted she would continue to pay the more than 90 percent of creditors who accepted the restructuring terms.
"The lifting of the stay by the Second Circuit makes it impossible to make the next payment on restructured debt in New York, and shows a complete lack of willingness to negotiate under conditions different from those dictated by Judge Griesa," a statement from the Argentine economy ministry said late on Wednesday.
Talks are nevertheless expected between the two sides in New York next week.
The holdout creditors are led by NML Capital Ltd., a division of billionaire Paul Singer's Elliott Management Corp., and Aurelius Capital Management, chaired by Mark Brodsky, who warned that next week's negotiations could prove to be a "charade".
"Pari Passu (equal treatment) requirements impede Argentina from making the June 30 coupon payment to the holders of restructured bonds unless, at the same time, it pays all that is being demanded by the vulture funds, which could be up to $15 billion in total," the economy ministry said.
So Argentina is willing to negotiate, but no one is buying it...
"Argentinas lawyer has informed the court that unidentified government officials will come to New York on an unidentified day next week to discuss settlement after years of rebuffing settlement overtures," said Aurelius' Chairman Mark Brodsky.
"I have learned not to rely on any assurance Argentinas counsel provide to our courts. I expect a charade, but I hope to be proven wrong," he added.
And just minutes after we posted this... Argentina rebuffs...
- Theres no Argentine mission or committee going to New York, Cabinet Chief Jorge Capitanich tells reporters in Buenos Aires.
- *ARGENTINA CABINET CHIEF JORGE CAPITANICH SPEAKS IN BUENOS AIRES
- *ARGENTINA ISN'T GOING TO NEW YORK TO NEGOTIATE: CAPITANICH
- *HOLDOUTS CAN ONLY BE OFFERED SAME TERMS AS DEBT SWAP:CAPITANICH
The 2033 ARG bonds dropped notably after yesterday's bounce to trade at 73.375.
As Acting-Man's Pater Tenebrarum concludes,
One good thing may come from the victory of the 'hold-outs': the government will find it difficult to rack up more debt. Some people quoted by Reuters bemoan that the situation will delay Argentina's return to international capital markets, but Argentina's citizens should probably be relieved to hear it. On the other hand, it may well mean that even more money printing is in store, so we cannot be entirely certain whether the news is actually good or bad in that sense.
One thing is certain though: the economic policies pursued in the country over the past century have consistently failed. No end to this failure is in sight as of yet. The country doesn't need people specializing in Keynes and Marx, it needs a dose of Mises and Hayek.
TOPICS: Business/Economy; Foreign Affairs; News/Current Events
KEYWORDS: argentina; bonds; default
“One good thing may come from the victory of the ‘hold-outs’: the government will find it difficult to rack up more debt.”
We haven’t had a problem thus far.
(oops, wrong country.../sarcasm)
posted on 06/19/2014 8:19:01 AM PDT
“One thing is certain though: the economic policies pursued in the country over the past century have consistently failed. No end to this failure is in sight as of yet. The country doesn’t need people specializing in Keynes and Marx,”
Socialism Is Legal Plunder (this country or someone else’s) - Bastiat
posted on 06/19/2014 8:21:42 AM PDT
In banker speak, Argentina is being squeezed.
posted on 06/19/2014 8:25:39 AM PDT
((K.E. N.P. N.C. +12 ..... History is a process, not an event)
What kinds of economic ripples will this have around the world?
If Wall Street doesn’t get its money maybe we’ll invade Argentina.
posted on 06/19/2014 8:33:45 AM PDT
by Jack Hydrazine
(Pubbies = national collectivists; Dems = international collectivists; We need a second party!)
And the money kept rolling out in all directions
To the poor, to the weak, to the destitute of all complexions
Now cynics claim a little of the cash has gone astray
But that’s not the point my friends
When the money keeps rolling out you don’t keep books
You can tell you’ve done well by the happy grateful looks
Accountants only slow things down, figures get in the way
posted on 06/19/2014 8:36:23 AM PDT
Coming to a Washington, D.C. near you soon!
Hopefully, we will administer the proper treatment to our congressCRITTERS when it happens.
And their families, too...all must suffer.
posted on 06/19/2014 8:36:48 AM PDT
by Da Coyote
To: Jack Hydrazine
RE: What kinds of economic ripples will this have around the world?
The ripples will mainly affect those who lent money to Argentina — mostly huge financial institutions and hedge funds who bought their bonds because of the high yield.
From hereon, Argentina will be LEPERS to the world financial market and almost nobody will want to lend her money.
Have you been watching this?
Just a couple headlines, thing is that while Argentina’s economy has been growing it’s still a 30th the size of the US —more of in the scale of Detroit defaulting.. Then again, that was ominous too...
posted on 06/19/2014 9:06:55 AM PDT
I would have thought the bankers would have learned their lesson on the first default but I guess not.
posted on 06/19/2014 9:25:44 AM PDT
by Georgia Girl 2
(The only purpose o f a pistol is to fight your way back to the rifle you should never have dropped.)
posted on 06/19/2014 9:41:27 AM PDT
by Stand W
( You can't fight in here! This is the War Room!)
The socialist president of Argentina now finds it is “impossible” to pay debts, and also continue Argentina’s socialist welfare state. She chooses to try to prop up the socialist welfare state for another few months (if that).
posted on 06/19/2014 9:49:28 AM PDT
(You don't notice it's a police state until the police come for you.)
Is this the reason gold is up $34/oz today?
Whatever’s happening in Argentina, is gonna happen here, I’ll bet.
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