As Bloomberg reports the decade-long battle between Argentina and holdout creditors is coming to a head. Argentina is likely to miss a bond payment that is due today, but the Latin American nation that defaulted on $95 billion in government bonds in 2001 has a 30 day grace period to negotiate its way out of the situation if it so chooses.
Official day for Argentina’s default
The US court recently blocked the government of Argentina from making payments of $539 million to bond holders it had settled with, but the court ruled such payments could not proceed. A public willingness to negotiate with the holdout creditors has not lead to any actual negotiating. As previously reported in ValueWalk, although Argentine officials were in New York City recently they did not meet with holdout creditors, New York-based Elliott management among them. Although today is the official day for default, negotiations could take place during the grace period if both parties are willing.
The court’s decision “closes Argentina’s options to finally force it to negotiate,” Jorge Mariscal, the chief investment officer for emerging markets at UBS Wealth Management, was quoted in the Bloomberg report saying. “Argentina should now stop using these delay tactics and get serious.”
Getting serious and negotiating appear to be on two separate tracks at the moment, as Elliott and other hedge funds are said to be waiting for Argentina to make contact with them. Argentina’s response yesterday was a full page advertisement in the New York Times that claimed the court favored holdout creditors and was trying to push the nation to default.
Argentina’s remarks on the court ruling
The court ruling “is merely a sophisticated way of trying to bring us down to our knees before global usurers,” Argentina said. “But he will not achieve his goal for quite a simple reason: The Argentine Republic will meet its obligations, pay off its debts and honor its commitments.”
The official response in the New York Times eyed a similar target to an Economy Ministry statement that eyed the legal decision. “A judge is trying to impede a debtor from carrying out its obligations and creditors from getting paid.”
Is this all hyperbole leading up to negotiations? Argentina could be setting up negotiations so they attempt to use time pressure to their advantage. “We are hoping to have the opportunity to negotiate with Argentina,” Jay Newman, a money manager at Elliott was quoted in the article saying. Meanwhile, as Zerohedge notes, the Argentine stock market isn’t worried – it continues to climb to near record highs.