Global Investing

Argentina back in court

February 27, 2013

Argentina squares off today in a U.S. Appeals court with the so-called holdout creditors who are demanding $1.3 billion in payments on defaulted bonds. A decision will probably take a few days but supporters of both sides have been mustering.

Emails have been pouring into journalists’ inboxes thick and fast from the Argentine Task Force, a lobby group that wants Argentina to settle with bondholders and identifies its goal as “pursuing a fair reconciliation of of the Argentine debt default”.  And yesterday, a noisy pots-and-pans protest was held outside the London offices of Elliot Associates (the parent company of one of the two hedge fund litigants)  by groups supporting Argentina in its battle against those it terms “vulture funds”.  Nick Dearden, director of the Jubilee Debt Campaign, a group that calls for cancelling poor countries’ debts, says:

If the vulture funds are allowed to extract their pound of flesh from Argentina today, we will see a proliferation of vulture funds in Europe tomorrow.

Meanwhile, market jitters are also mounting. Argentine dollar bond yields have risen steadily since the start of the year, with the country’s 2017  dollar bond now yielding 15.5 percent, 400 basis points up from early January (it’s still off the 20 percent record high hit in November when a technical default looked imminent).

Debt insurance costs too have surged. The annual cost of insuring one year of exposure to $10 million of Argentine debt via CDS has risen to around $5 million, according to Markit. That is double the level of one-year CDS at the start of 2013.

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