Argentina Special


Argentina: Argentina reaches agreement with Paris Club; bondholder conflict looms

June 16, 2014

On 29 May, Argentina and the Paris Club group of international creditor governments reached an agreement to clear debt in arrears over a period of five years, extendable under certain conditions. The Argentinian government will pay arrears amounting to USD 9.7 billion, including a minimum disbursement of USD 1.15 billion (plus 3.00% interest), up to May 2015. The following payment should be made in May 2016. This deal could pave the way for the government to return to international financial markets, in which it has not participated since the 2001 crisis that prompted a record USD 93 billion default.

Nevertheless, the government is still locked in a dispute in U.S. courts with holdout bondholders from previous debt swap deals who demand full repayment of debt from the 2001 default. The U.S. Supreme Court is expected to announce its decision on 16 June. If the court refuses to hear the Argentinian government’s appeal, the country will have to pay the holdouts USD 1.4 billion in debt. Failure to comply with the court order will put the country in a technical default. However, if the Court asks for advice from U.S. Solicitor General Donald Verrilli, then the process will be postponed until 2015. The court could also rule in favor of the government and declare sovereign immunity.

Author: Ricard Torné, Lead Economist

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