Argentine markets fall post-default, NY hearing on Friday

Thu Jul 31, 2014 6:26pm EDT
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By Sarah Marsh and Richard Lough

BUENOS AIRES (Reuters) - Argentina's bond and stock markets and peso currency dropped on Thursday after Latin America's No. 3 economy defaulted for the second time in 12 years after the failure of last-ditch talks with holdout creditors.

The default came after Argentina did not strike a deal with lead holdout investors NML Capital Ltd, an affiliate of Elliott Management Corp and Aurelius Capital Management, in time for a midnight Wednesday EDT (0400 GMT) payment deadline.

The government maintains that it has not defaulted because it deposited an interest payment on one of its bonds due 2033 that is governed by New York law. U.S. District Judge Thomas Griesa in Manhattan said in June when the payment was made that it was illegal because it violated his ruling.

At that time, Griesa deemed the $539 million deposit with the Bank of New York Mellon, Argentina's trustee bank, was illegal because it did not include a concurrent court-ordered payment of $1.33 billion plus accrued interest to the holdout investors.

Argentine Economy Minister Axel Kicillof warned on Thursday that the country could bring more lawsuits to challenge the contention that it is in default.

Bondholders who participated in the two prior restructurings of the 2002 default now have to decide whether or not to seek immediate full payment of principal and interest on their restructured debt, a process known as acceleration.

This process requires 25 percent of the bondholders on each of 16 bonds issued in the 2005 and 2010 restructurings to ask BNY Mellon for a formal decision on default. The bank has 60 days to decide.

"Let’s suppose that the bank considers it as a default, Argentina is sure that this is not a default, so it will appeal it to a judge,” Kicillof said after returning to Buenos Aires from the failed talks in New York.   Continued...

A woman walks past a graffiti that reads "No to the debt payment" in Buenos Aires, July 28, 2014.    REUTERS/Marcos Brindicci