Argentina on brink of new debt crisis as president vows to burn bondholders
Published 18/06/2014 | 02:30
Argentina has just two weeks to come up with a deal to avoid a second debt crisis in 13 years.
The country's president Cristina Fernandez de Kirchner has ruled out paying holders of defaulted bonds in full to comply with a US court order.
She made a nationwide address hours after the US Supreme Court declined to hear Argentina's appeal of the case, and used the term "extortion" to describe the ruling.
The American order requires Argentina to pay defaulted bondholders when it makes payments on its restructured debt.
The next interest payment is due on June 30, limiting the time for Fernandez to reach an accord with so called "holdout" creditors including hedge-fund manager Paul Singer's Elliott Management Corp. Fernandez said complying with the ruling was impossible and would expose Argentina to as much as $15bn (€11bn) in claims from creditors who rejected restructuring offers following the country's $95bn (€71bn) default in 2001.
The president said she instructed her economy minister Axel Kicillof, who negotiated to resolve debt disputes with the Paris Club and Repsol SA in the past four months, to figure out a way to keep paying holders of restructured notes.
"Argentina has the willingness to negotiate," Fernandez said.
"What it doesn't have – and I'll spell it out for you – is the need to be subjected to such extortion. I don't think it's deserved."
Argentina's restructured bonds plunged an average 9.3pc yesterday as investors considered the country's next steps.
Fernandez said last August that she would offer to swap holders of restructured New York-law bonds into debt governed by local law to avoid paying holdout creditors in full.
Government attorneys later denied having a plan to do so.
According to a May 2 memo leaked to an Argentine website last month, the country's attorneys recommended a default and immediate restructuring in the event the Supreme Court rejected the appeal, which was tied to claims of $1.3bn (€96m).
Some investors are speculating Kicillof may indicate as soon as today if the Argentine government's plan is to change the jurisdiction on the bonds.
"I don't know how viable that is, but there's very little time to negotiate," Kathryn Rooney Vera, a macroeconomic strategist at Bulltick Capital Markets, said.