Date
22 November 2017
Argentina is likely to default on its 2033 bonds if it cannot reach a deal with creditors or unless the court issues a stay on an earlier ruling. Photo: Bloomberg
Argentina is likely to default on its 2033 bonds if it cannot reach a deal with creditors or unless the court issues a stay on an earlier ruling. Photo: Bloomberg

Argentina bond default looms

Argentina is set to default in less than two weeks unless it reaches a deal with holders of defaulted bonds or US courts grant a delay to allow it to continue servicing restructured bonds, Bloomberg News reported on Monday.

A US judge blocked the country’s attempt to make a June 30 bond payment, saying it must also comply with an order to pay US$1.5 billion to hedge funds and other holders of defaulted bonds that sued for full repayment, the report said.

There are three possible scenarios:

* By July 30, Argentina reaches a deal with creditors holding untendered securities from the nation’s US$95 billion default in 2001. This would allow Argentina to regain access to international credit markets, Goldman Sachs economist Mauro Roca told Bloomberg. “It would ease pressure on the peso and increase international reserves,” he said.

*  Court issues a stay on the ruling, allowing officials to continue making payments on its performing bonds while giving them more time to seek an accord with holdouts.

Argentina will default on its 2033 bonds if it can’t reach a deal or win a stay, sparking a selloff from the current 88.3 US cents on the dollar, the report said. Stuart Culverhouse of Exotix Partners told Bloomberg the notes could fall to 50 cents on the dollar.

“It would be wrong from their political thinking to assume that it’s better to default and then negotiate,” Culverhouse was quoted as saying. “With a default you’ve got all the corporates going bankrupt, you’ve got recession, higher unemployment, inflation, the currency falling; that’s not a position of strength.”

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