Reuters
Argentina has deposited the next payment needed to avoid a default on its restructured bonds, but a US federal court decided not to let the payment go through.
Both actions increased the stakes in a 12-year legal chess game between Argentina and creditors who refused to accept the downgraded terms offered by the country’s 2005 and 2010 debt restructurings and are suing for full repayment.
Argentina will have the month of July to negotiate with its holdout creditors before falling into technical default.
The next payment is due on Monday, but with that payment blocked by the courts, Buenos Aires will have a 30-day grace period to strike a deal with the holdouts.
If it fails, Latin America’s No 3 economy would be pushed into another painful default at the end of next month.
Economy Minister Axel Kicillof said Argentina owes an $832mn coupon payment on restructured bonds on Monday. “Of that total, $539mn was deposited in the accounts ... of the Bank of New York Mellon at the Central Bank of Argentina,” Kicillof said adding that the rest of the $832 million had been deposited by way of other financial institutions.
“We affirm our commitment to honour our debt to all creditors,” he said.
In order to pay holders of the country’s restructured bonds, Argentina needed a stay to be issued by US district judge Thomas Griesa in New York because he had ordered earlier that Argentina was not to make payments without paying the holdouts at the same time.
Griesa denied Argentina’s stay request about an hour after Kicillof said the deposit had been made. Griesa has ordered Argentina to pay the holdouts $1.33bn plus accrued interest, at the same time it pays the 93% of bondholders who accepted the 2005 and 2010 restructurings.
Argentina has said it cannot afford to pay so much to the holdouts and asked Griesa for a stay on that order, which would have allowed Monday’s coupon payment to go through. Argentina’s debt servicing costs are set to more than double in 2015 as its economy stagnates, inflation soars at about 30% and foreign reserves slide to critically low levels.
Central bank reserves, which fell 30% last year and stand at eight-year lows of about $29bn, are seen falling in the second half of 2014 after Argentina’s main farm exports, soy and corn, are harvested and sold.
But Argentina’s financial markets slipped only slightly on the news of Griesa’s rejection, as investors bet that the country would use the 30-day grace period to strike a deal with the holdouts.