Earlier we ran an article on the US Supreme Court decision that allowed some hedge fund bond holders to be paid in full on some bonds they bought from Argentina years ago at a steep discount. Argentina had settled with 90% of the rest of the bondholders who took losses on the bonds. Argentina has not yet agreed pay these bondholders with a July 30 deadline looming. If they don't pay and the deadline is not extended, Argentina will be in default. Here is the latest on that situation and also a couple of related articles of interest.
So with about 11 days to go Argentina has not settled yet and according to the Reuters article above has not even scheduled talks. Here is a quote from one of the investors holding the bonds:
"The Argentine government appears determined to default. We hope it chooses to avoid this dead-end path," NML said.
The article also says:
"NML Capital Ltd, a unit of Elliott Management Corp suing for full repayment on its bondholdings, said Argentine officials refused to meet or negotiate ahead of a July 30 deadline."
It looks like Argentina is playing hard ball in this situation and has asked for a stay of the July 30th deadline. It is hard to tell if this will get resolved or if Argentina will actually default on these bonds. We will follow it to see what happens.
This story allows us to mention a couple of other semi-related articles of interest. First we have this news of China giving Argentina a $7.5 billion loan. A reasonable question to ask is why would you loan $7.5 billion to a country which may default on its old bonds in a few days? A guess might be to allow China (and BRICS) to gain influence with Argentina and elsewhere in South America. Putin went to Argentina just before the BRICS summit and talked about improving trade and relations etc. The BRICS were said to be courting Argentina to join with them "after they clean up their bond situation". So this could be a strategic move by China-BRICS to gain influence seeing that Argentina is upset with the US court ruling right now.
Here is the really interesting article all readers here need to read. It is an article in the Economist titled "Busted Flush" about sovereign debt restructuring. The article uses the current Argentina situation to bring up the general topic of how the IMF wants to deal with sovereign debt problems in general. This where the article gets our attention.
Below we will paste a few quotes and then add some comments in bold type just below.
"Meanwhile the IMF’s new plans could make the modification of debt contracts more frequent. Because the fund is often a troubled debtor’s only source of cash, the terms on which it lends can dictate whether or not other creditors get paid. It is seared by the experience of Greece, where (along with the European Union) it provided a giant bail-out in 2010 to avoid a restructuring that nonetheless took place in 2012. In response, it is proposing two changes to its rules. First, it wants greater leeway to support the “reprofiling” of sovereign debt. Reprofiling is a relatively gentle form of restructuring, in which the maturity of bonds is extended but the amount owed and interest rate stay the same.