Jul
31
Argentine banks turned lower after the closing bell on Wednesday as Argentina has defaulted on its debt, for the second time in 13 years, after last-minute talks in New York with a group of bond-holders ended in failure.
Banco Macro SA (ADR) (NYSE:BMA), Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL) and BBVA Banco Frances S.A. (ADR) (NYSE:BFR) all made noteworthy gains on Wednesday amid hopes that government officials and holdout creditors are getting closer to a deal amid talks to avert a second default in 13 years to help the country avoid default, but were poised to decline as talks failed.
Argentina and the hedge funds, led by billionaire Paul Singer’s Elliott Management Corp., failed to reach agreement in talks today in New York, according to the court-appointed mediator in the case, Daniel Pollack. In a press conference after the talks ended, Argentine Economy Minister Axel Kicillof described the group of creditors as “vulture funds” and said the country wouldn’t sign an accord under “extortion.”
“The full consequences of default are not predictable, but they certainly are not positive,” Pollack wrote in an e-mailed statement. “Default is not a mere ‘technical’ condition, but rather a real and painful event that will hurt real people.”
Kicillof, speaking at the Argentine consulate in New York, told reporters that the holdouts rebuffed all settlement offers and refused requests for a stay of the court ruling. He said Argentina couldn’t pay the $1.5 billion owed to the hedge funds because doing so would trigger clauses requiring the country to offer similar terms to other bondholders. He also criticized the judge in the case and ratings agencies.
The latest default is expected to exacerbate problems in Argentina’s recession-hit economy, analysts say.
“The full consequences of default are not predictable, but they certainly are not positive,” Mr Pollack said.
U.S. ratings agency Standard Poor’s declared Argentina in default after the government missed a deadline for paying interest on $13 billion of restructured bonds.
The South American country failed to get the $539 million payment to bondholders after a U.S. judge ruled that the money couldn’t be distributed unless a group of hedge funds holding defaulted debt also got paid. Argentina, in default for the second time in 13 years, has about $200 billion in foreign-currency debt, including $30 billion of restructured bonds, according to SP.
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