The nation of Argentina was declared in default on billions of dollars of foreign-currency obligations today, as they were unable to reach deal with American investors on a missed interest payment. This is the second time in 13 years, the country has gone into default.
According to the ratings agency Standard and Poor's Argentina has about about $200 billion in foreign-currency debt, including $30 billion of restructured bonds.
As Quartz explains, Argentina has spent most of the last decade restructuring its debt, following a 2001 default, but a small group of investors, led by New York-based hedge funds are demanding full repayment of that debt. The creditors won a judgement requiring Argentina to pay them $1.5 billion, but the Argentina's Economy Minister, Axel Kicillof, says paying that debt "would trigger bond clauses requiring the country to offer similar terms to other bondholders." However, a U.S. judge ruled that they can't not make a required $539 payment to those other bondholders, unless they also payout the money owed to the hedge funds. So nobody got paid anything, and South America's third-largest economy is now in (probably) in default.
The situation could be temporary, as they could still negotiate a settlement over the $1.5 billion payment. However, Kicillof has been unable to work out a deal through a court appointed mediator. Negotiations will continue over the next several days, though Argentina's president Cristina Kirchner has made it a political point of pride to not pay the "vulture funds" what the courts say they are owed.
Argentina also maintains that they are not in default, because the $539 million interest payment was delivered to an escrow account. However, that money has not been distributed to creditors.
This article is from the archive of our partner The Wire.
We want to hear what you think about this article. Submit a letter to the editor or write to firstname.lastname@example.org.