Thursday, July 31, 2014 10:41 pm
Argentina blamed the United States Thursday for the legal battle that forced it to miss a debt payment and — despite ratings agencies’ declarations to the contrary — denied being in default.
Ratings agency Fitch declared Argentina in “restrictive default” one day after 11th-hour talks failed to resolve the country’s dispute with two US hedge funds that refuse to accept a write-down on their Argentine bonds.
Fitch’s label echoed the “selective default” declared by Standard & Poor’s. Both terms indicate that Argentina has defaulted on one or more of its financial commitments but continues to meet others.
US District Judge Thomas Griesa has blocked Argentina from paying creditors who agreed to take write-downs on their bonds without also paying two US hedge funds that took it to court demanding the full $1.3 billion it owes them.
Argentine stocks plummeted Thursday, closing 8.43 percent down, as the repercussions of the default began to set in.
President Cristina Kirchner in a nationally televised address Thursday evening denied her country was in default, reiterating that it had transferred the payment in question and condemning the tactics of the hedge funds, which she calls “vulture funds.”
“We live in a profoundly unjust and profoundly violent world and this is also violence. Like missiles in war, financial missiles also kill,” the president said in a nationally televised address.
“I want all Argentines to remain very calm, because Argentina is going to use all the legal instruments our contracts give us.”
The Bank of New York confirmed Buenos Aires’ payment to the exchange creditors was still sitting in the US bank’s account at the Argentine central bank, frozen there by Griesa’s ruling.
Amid the back-and-forth, some in the financial world called for a simple yes or no on whether the country had defaulted.
Griesa, meanwhile, set a hearing on the case for Friday at 11:00 am (1500 GMT) in New York, a court spokeswoman told AFP.
Kirchner’s cabinet chief, Jorge Capitanich, blamed the US government, Griesa and a court-appointed mediator for the messy legal dispute, which made Argentina miss a $539 million payment to creditors who agreed to a 70-percent write-down after its 2001 economic crisis.
“If there’s a judge who’s an agent of these speculative funds, if the mediator is their agent, what is this justice you’re talking about? There’s a responsibility of the state here, of the United States, to create the conditions for the unconditional respect of other countries’ sovereignty,” he said.
He accused Griesa and mediator Dan Pollack of “incompetence” and said Argentina would take the matter to international courts.
Argentina says paying the holdouts could expose it to claims for up to $100 billion from “exchange creditors” who accepted restructured bonds, who are entitled to equal treatment under what is called a Rights Upon Future Offers, or RUFO, clause.
– Denial in Buenos Aires –
Argentine Economy Minister Axel Kicillof vowed the country would pay its bondholders.
“We will do what is possible so that that money reaches its legitimate owners,” Kicillof said, insisting: “This is not a default.”
The Bank of New York confirmed Buenos Aires’ $539 million payment to the exchange creditors was still sitting in the US bank’s account at the Argentine central bank, frozen there by Griesa’s ruling.
Amid the back-and-forth, some in the financial world called for a simple yes or no on the default question.
The International Swaps and Derivatives Association, a trade organization for participants in the derivatives market, said it had accepted a request from Swiss bank UBS to rule whether Argentina was in default or not.
A default would activate insurance contracts on the relevant debt.
One of the plaintiffs in the case, hedge fund NML Capital, said Argentina “refused to seriously consider any (proposals), and instead chose to default.”
But Argentina complained that the hedge funds — which bought defaulted Argentine bonds at knockdown rates, then sued for full payment — had refused to compromise.
Kicillof said the holdouts had rejected an offer that would have given them a 300 percent profit.
.Updated with reports of President Kirchner’s broadcast