As deadline looms, Argentina moves closer to another default

lunes 30 de junio de 2014 17:20 GYT

By Joan Magee

NEW YORK, June 30 (IFR) - Argentina edged closer Monday to its second technical default in 13 years, with a 30-day grace period expected to kick in at midnight for payment on the country's restructured bonds.

The long-running and bitter standoff - pitting the government on one side and holdout creditors backed by the US courts on the other - looks set to come to a head barring any last-minute breakthrough.

Some observers see the onset of the grace period as the catalyst for forcing Argentina to come to the negotiating table, even though it has repeatedly said it will never pay what it calls the "vulture funds" who refused to join more than 90% of bondholders that agreed to restructuring in the first default.

Arturo Porzecanski, professor of international economics at American University, put the likelihood of revived discussions at 60%.

"The Argentine government will negotiate and reach a deal with the holdout creditors before end-July, thereby forestalling a default," he said.

"All other scenarios would involve Argentina defaulting to its exchange bondholders. That would aggravate the country's already bad economic situation, like a larger gap between the official and unofficial exchange rate, deeper recession and faster inflation."

The default threat has hit the country's Boden 2015s over the past few weeks. Volatility subsided as the deadline approached, though the 2015s were down another 40ct Monday to 97.00-97.50, while its five-year CDS widened slightly to 1,595bp-1,692bp.

Its dollar-discount 2033s - on which the interest payment is due by midnight - were spotted at 84.00-85.50 in the morning after trading at 85.00 mid-market on Friday.   Continuación...