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Argentina Hasn’t Defaulted Until It Says It’s Defaulted!

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And it says it has definitely NOT defaulted.

"Only the country that does not pay can declare default or the cessation of payment," Mrs. Kirchner said in a speech at a summit in Brazil, repeating previous declarations that Argentina will continue to pay its debts.

The holdouts "want the restructuring to collapse," Mrs. Kirchner said Wednesday. At the end of June, Argentina deposited around $900 million for interest payments on those restructured bonds in an intermediary account at its central bank but most of that is frozen there by the court order. The president was defiant, saying the country has fulfilled its obligations and couldn't be considered in default. "Argentina has paid its debt and will continue to pay its debt," she said.

“There cannot be a default when de debtor is paying,” Capitanich stated in his daily press briefing. “Argentina pays, it has not defaulted. There is no possibility of entering default because Argentina pays in good faith. The vulture funds are the ones acting in bad faith by not supporting Argentina’s request [to US Judge Thomas Griesa] for a stay”.

Not that said lack of support matters, of course, since, you know, he can’t declare Argentina in default anyway, according to Argentina. But he’s going to go ahead and pretend that he still has some kind of authority here.

The hearing will address six stakeholders' requests for clarification in the continuing dispute between Argentina and its holdout creditors, including holders of Argentine bonds governed by U.K. and Japanese law. These bondholders have asked U.S. District Judge Thomas Griesa to clarify whether they are allowed to receive interest payments on their restructured Argentine bonds since the judge has ruled that Argentina isn't permitted to pay its restructured bondholders until it pays the holdouts.

The hearing is also expected to address what the Bank of New York Mellon should do with the $539 million that Argentina deposited with it on June 26. The deposit, which was intended for a June 30 interest payment on the country's restructured bonds, was seen as an attempt to get around Judge Griesa's ruling because Argentina hadn't made a payment to the holdouts. The money is still sitting in BNY Mellon's account, and the holdouts have asked the judge to order BNY Mellon to return the cash to Argentina.

And not that it matters (see above), but even if Argentina could be forced to bring all of its good faith to the negotiating table with Paul Singer for the first time, and even if that rights upon future offers clause were to become an issue, the country may be off by an order of magnitude, re: how much it would actually cost it.

If President Cristina Kirchner opts to settle with two New York hedge funds that have won court-ordered awards of more than $1.5 billion, economists say it will most certainly lead to additional claims that will cost Argentina's government about $13 billion.

Mrs. Kirchner and her top economic aides have fought against paying out the full value on bonds the hedge funds bought cheap, mostly after Argentina's massive 2001 default. Calling the creditors "vultures" and their demands "extortion," the Argentine government says that paying the hedge funds would open the floodgates to myriad suits costing $120 billion and drive the country into bankruptcy.

But economists and former policy makers in Mrs. Kirchner's government said that while Mrs. Kirchner is right about Argentina facing a hefty bill, the cost is likely to be far less than what Argentine officials have claimed. And they say the government could soften the blow by negotiating a payment schedule and offering compensation in bonds.

U.S. District Court to Hold Hearing on Argentina Debt [WSJ]
If Argentina Settles Debt Dispute, More Claims Could Come [WSJ]
Capitanich: ‘It is Vulture funds that act in bad faith’ [Buenos Aires Herald]
Argentine Creditors Seek Names to Stop Deal-Killer Clause [Bloomberg]