Argentina’s credit rating was downgraded to “selective default” by Standard & Poor’s as the South American country missed Wednesday’s deadline for a grace period during ongoing negotiations with holdout debt holders.
Wednesday is the cutoff for Argentina to make good on a $539 million payment to bondholders, which was placed on hold by US judge Thomas P. Griesa’s order tying that payment to ongoing litigation by vulture funds which refused the country’s original cents-on-the-dollar debt restructuring offer.
Analysts generally do not believe that a default by Argentina will have the same consequences as in 2001.
“An Argentina default is expected to be short-lived at this point and shouldn’t have any major implication for the country,” said Mauro Roca to Bloomberg, a senior Latin America economist at Goldman Sachs in New York.
“There’s the expectation that a deal with holdouts will be worked out soon.”
The country’s Economy Minister Axel Kicillof arrived in New York this week to engage in negotiations with holdout creditors. The talks have been overseen by a mediator appointed by the US judge who placed its payment on hold.
Speaking during a press conference on Wednesday evening Kicillof told reporters that the so-called vulture funds had refused a new offer proposed by Argentina.
Kicillof further stated that upon the country’s request for a stay to process the existing payment to 90%-plus of bondholders, the judge responded that only the holdout vulture funds could grant that request. The Argentinian minister said that the hedge funds did not comply to a stay.
“We will not sign anything that puts at risk the future of the Argentinian people,” said Kicillof. “Argentinians can rest easy. The country will continue forward. But have no doubt that we are open to further dialogue, just as long as it is under reasonable conditions.”
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