Standard & Poor’s has found that Argentina defaulted after it could not make an interest payment of $539 million due on its discount bonds, according to The New York Times.
The action from Standard & Poor’s occurred on Wednesday and hedge funds in New York tried to reach a last-minute agreement on the debt for the country. There were five hours of mediated talks on Wednesday, but neither side even came close to an agreement.
Daniel A. Pollack is the court-appointed mediator to the talks. Pollack said, “Unfortunately, no agreement was reached and the Republic of Argentina will imminently be in default.”
“Default is not a mere “technical” condition, but rather a real and painful event that will hurt real people: these include all ordinary Argentine citizens, the exchange bondholders (who will not receive their interest ) and the holdouts ( who will not receive payment of the judgments they obtained in court). The full consequences of default are not predictable, but they certainly are not positive.”
Argentina’s rating on its debt was lowered previously to “selective default” by Standard & Poor’s, who claimed that the country had a grace period of 30 days following the scheduled interest payment due date of June 30 to make the payment on the interest.
The fight goes back to 2001 when Argentina defaulted on tens of billions of dollars of bonds. Later on, the country exchanged the bonds for discounted ones with the majority of its shareholders. A small portion of the shareholders did not accept the new bonds, including Paul Singer’s Elliott Management.
The Argentina government was sued by NML Capital, an affiliate of Elliott. They asked for interest and full payment.
The case went through the United States court system until 2012, when a judge in Manhattan at the federal level issued a ruling that said Argentina could not make its payments to bondholders on exchanges without paying other holdouts.
The ruling was appealed by Argentina and the case moved to the U.S. Supreme Court. The appeal was rejected there just last month.
A spokesman for NML said, “During this process, the Special Master proposed numerous creative solutions, many of which were acceptable to us. Argentina refused to seriously consider any of them, and instead chose to default.”