Argentina downgraded by S&P

Argentina downgraded by S&P

On September 6, Argentina urged the appeals court to reconsider its ruling which upheld the order for it to pay $ 1.33bn to investors who chose to hold out from two debt exchanges in 2005 and 2010.

About 93pc of Argentina’s bonds were restructured with holders receiving between 25 cents to 29 cents on the dollar.

No comment from Argentina’s Finance Ministry was immediately available.

The holdout investors, led by Paul Singer’s Elliott Management Corp affiliate NML Capital and Aurelius Capital Management have fought in US courts for full repayment on bonds they own which have been in default since 2001.

If Argentina – which has vowed never to pay the holdouts – fails to get the ruling overturned in the appeals process, the order bars the transfer of money to investors who participated in the exchanges if the holdouts are also not paid their award.

Investors are bracing for a potential default on approximately $ 24bn in restructured debt if Argentina elects not to pay the holdouts.

The cost to insure a $ 10m portfolio of Argentine sovereign bonds against default or restructuring is currently $ 2.516m annually for five years, down from $ 2.614m on Monday, according to data provider Markit.

“A decision by the US Supreme Court not to hear the appeal or the implementation of an exchange proposal that makes alternative payment arrangements that, in our view, materially alter the terms of its bond indentures to the detriment of creditors could prompt a downgrade,” S&P added.

(Edited by Andrew Trotman)

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