Wednesday’s version of reading tea leaves involves Argentina’s economy minister Axel Kicillof, who will be in New York to speak to the United Nations about Argentina’s debt situation. In case the U.N. missed it, Argentina defaulted a while back – 12 years ago – and they’ve been fighting with a group of investors on paying some of their debt since. Which is a roundabout way of saying Kicillof may not just be in New York to talk to the U.N., not when NML, Aurelius and the other holders are all also in New York too, and the judge in question, and any special envoy he introduces to try to wring some kind of compromise out of this situation. There’s a big coupon payment due June 30, and the country has been prohibited from doing so unless it pays the holdouts, which it has pledged not to do, giving it a 30-day grace period before being declared in default.
So the thing to watch for is something like a clandestine meeting between all parties to find a way to reach an accord, even if it’s the kind of thing that comes down to the July 30 wire – when Argentina would be considered in default again (double-secret default, as Dean Wormer would have it, and really, if John Vernon were alive, he’d have solved this mess a long time ago).
Argentina is worried about being on the hook for as much as $15 billion and not just the $1.33 billion-plus-interest owed to the holdout hedge funds – Moody’s puts the number closer to $7.5 billion, maybe up to $12 billion, per an overnight story from Dan Bases. Neither is a number Argentina wants to deal with, hence their reluctance to participate in any kind of negotiation that amounts to a gun to their heads.
There’s going to be a lot of face-saving going on. Whether the holdouts will get their $1.33 billion is in question – it’s likely to be something less than that, with some kind of provision that allows it to be implemented, perhaps, after the expiration of a deadline at years-end that would obviate the need for the South American nation to consider paying the rest of the bondholders something additional.
Given the need to finance ongoing activities (that is, a recession), time is of the essence. Nobody is going to get entirely what they want – by now the opportunity cost for the hedge funds has to have been significant (they could have hung back and bought a bunch of Greek debt and stakes in Icelandic banks and been done with this), and Kicillof can ill afford to go home and say he caved into the “vultures” that officials blame for the country’s economic strife. So a meeting in New York may not be on the calendar, but one never knows.