Argentina fails to reach debt agreement, default imminent

Thu Jul 31, 2014 12:09am EDT
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By Richard Lough, Eliana Raszewski and Daniel Bases

BUENOS AIRES/NEW YORK (Reuters) - Argentina will default on its debt within hours after talks with holdout creditors broke down on Wednesday.

As the clock ticked toward a midnight (0400 GMT) deadline, Economy Minister Axel Kicillof stuck firmly to the government line, repeatedly denigrating the holdouts as "vultures" after two days of intense negotiations.

Argentine banks scrambled to put together a proposal to buy out the non-performing debt held by hedge funds and avert a default. But that deal collapsed, a senior banking executive and a second source from the financial market said.

"It all fell through," said the banking executive.

A default will hurt an economy already in recession, fueling risks to consumer prices in a country with one of the world's highest inflation rates and putting more pressure on a peso that was devalued sharply early in the year.

It also marks a set-back to the Buenos Aires government's attempts to return to global credit markets. Argentina has been isolated from international financial markets since its record $100 billion default in 2002.

The default results from Argentina's failure to comply with a court order that holdout bondholders be paid at the same time as a $539 million coupon payment to those who accepted reduced payments in two prior restructurings.

"Unfortunately, no agreement was reached and the Republic of Argentina will imminently be in default," Daniel Pollack, the court-appointed mediator in the case, said in a statement on Wednesday evening.   Continued...

Argentina's Economy Minister Axel Kicillof arrives at a press conference at the Argentine Consulate in New York July 30, 2014. REUTERS/Carlo Allegri