Argentina defaults as 11th hour talks with hedge funds collapse

Argentina and hedge funds demanding a full pay-out on some of the nation's bonds fail to strike a deal

Argentina has defaulted on its debt for the second time in 13 years after it failed to reach an agreement with creditors demanding full repayment of some of the nation's bonds on Wednesday.

A US judge had set a midnight deadline for Argentina and a group of hedge funds, which the country describes as "vulture funds" trying to make a profit by wrecking the country's economy, to broker a new deal and advert default.

Addressing the nation, Argentina's Economy Minister Axel Kicillof said investors demanding a full repayment of approximately $1.5 billion worth of Argentine bonds had rejected the government's latest offer and no agreement was reached. Argentina has repeatedly said it cannot afford to pay the full amount.

"Unfortunately, no agreement was reached and the Republic of Argentina will imminently be in default," said Daniel Pollack, the court-appointed mediator in the case, adding that "the ordinary Argentine citizen will be the real and ultimate victim" of the saga.

Credit rating agency Standard & Poor's placed Argentina’s rating on "selective default" shortly after the announcement was made. Argentine bonds did not react with some analysts arguing that the default had been priced in.

 

Reacting to S&P's downgrade, Mr Kicillof said: "Who believes in the rating agencies? Who thinks they are impartial referees of the financial system?...Why didn’t they warn the owners of mortgages in 2008 if they know so much about risk?"

Argentina's latest default follows a lengthy court battle between Buenos Aires and a group of hedge funds, including  Aurelius and NML, which bought Argentinian sovereign debt on the cheap after its 2001 default in the hope of forcing the country to pay them back in full.

Other private bondholders – most of whom unlike Aurelius lent money to Argentina before its 2001 default, have agreed to take a “haircut” on their loans of about 70 per cent. But Aurelius and NML have pursued their case relentlessly, claiming the country must pay its dues in full. Their case was bolstered after a US court blocked payments to other bondholders until an agreement was reached.

Argentina defaulted on $100bn of debt in 2001-2002, the largest sovereign default in history, which sent the country's economy into deep recession and prompting a devaluation of the Argentine peso. Unemployment rose to 23.6 per cent and the country's GDP fell 28 per cent from its peak in 1998.

Start your day with The Independent, sign up for daily news emails
Voices
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appeal
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
Arts and Entertainment
Strictly finalists Simon Webbe, Caroline Flack, Mark Wright and Frankie Bridge
tvLive: Simon Webbe, Caroline Flack, Mark Wright and Frankie Bridge face-off in the final
Sport
Ched Evans in action for Sheffield United in 2012
footballRonnie Moore says 'he's served his time and the boy wants to play football'
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture