South America

Argentines are poised for a default on Wednesday – their third in just over three decades. The trigger would be a missed $539m interest payment after mediated talks between the government and a group of “holdout” creditors made no apparent progress last week. The growing prospect of default has begun to focus minds on what would come next. Economists broadly expect a recession in the country would deepen, inflation to rise and capital flight – possibly triggering a second devaluation of the peso this year.

Settlement talks set for Wednesday between Argentina and bondholders who did not participate in the country's past debt restructuring have been rescheduled for Thursday, the court-appointed mediator said. Daniel Pollack, a New York lawyer appointed to oversee the settlement discussions, had scheduled a meeting for 10 a.m. EDT (1400 GMT) after a U.S. judge ordered the parties to meet "continuously" until a deal is reached. Pollack in a statement said he was advised by the Argentina delegation they could not get to New York for the Wednesday meeting.

A U.S. judge ordered Argentina and investors who did not participate in the country's past debt restructurings to meet "continuously" with a court-appointed mediator until a settlement is reached, warning of the threat of a new default, Reuters reported. U.S. District Judge Thomas Griesa in New York told Argentina and lawyers for investors who declined to restructure their bonds after the country defaulted on about $100 billion in 2002 that time was running out to reach a deal and avert a fresh default. "That is about the worst thing I can envision.

Banco Espirito Santo (BES) could be sued over a loan that one of its founding family's holding companies failed to repay to Portugal Telecom, sources said on Thursday, as credit rating agencies downgraded the bank and its key shareholder. Still, Finance Minister Maria Luis Albuquerque said the problems faced by BES, Portugal's largest listed bank, and the family's Espirito Santo Group did not pose an imminent danger to the country's financial system and reiterated the government did not plan to use public funds to help the bank.

A Florida federal bankruptcy judge on Tuesday approved Brazilian bank Banco Cruzeiro do Sul SA's petition for Chapter 15 bankruptcy, a decision that will provide the bank some protection in United States courts while it continues its primary insolvency proceedings in Brazil, Law360 reported. U.S. District Court Bankruptcy Judge Laurel M. Isicoff granted recognition to the bank's petition for Chapter 15 bankruptcy, which was filed on June 5, saying that the bank's foreign representative, Eduardo Felix Bianchini, is qualified and granting the bank protection in U.S. courts.

As Argentina’s multi-billion dollar showdown with its hedge fund creditors nears its finale, global organisations are trying to hammer out a plan that will prevent such a stand-off from being repeated, the Financial Times reported. For the past six months, debt issuers, market intermediaries and investors have been discussing a new idea that would make it more difficult for small numbers of recalcitrant creditors to “hold out” against a critically indebted country that restructures its debt.

Some large shareholders in Grupo Oi SA could sue partner Portugal Telecom SA if a debt investment made by the latter ends up in default, which could delay the companies' planned merger, a source close to the deal said, Reuters reported. Shareholders of Rio de Janeiro-based Oi want to push Portugal Telecom to take a smaller stake in the company resulting from the merger, depending on the outcome of the debt negotiations later on Tuesday, said the source, who declined to be identified because of the sensitivity of the issue.

Less than three weeks before Argentina risks a default, government officials still haven’t met with hedge funds who won a court ruling forbidding the country to make bond interest payments before they get $1.5 billion, Bloomberg News reported. “We have not seen any indication that Argentina is serious about even beginning a negotiation,” NML Capital, one of the holders of bonds from Argentina’s 2001 default that sued for full repayment, said in a statement July 11.

A Netherlands-based subsidiary of Brazilian tycoon Eike Batista's bankrupt shipbuilding and shipleasing unit OSX Brasil SA suspended payments to creditors after being granted protection by a Dutch court, Reuters reported. According to a securities filing on Thursday, OSX sought protection for its OSX WHP 1&2 Leasing BV unit after an unnamed "alleged creditor" asked a court to order payment in a way that threatened OSX's obligations to other creditors.

Holdout investors who rejected Argentina’s debt restructurings in the wake of its $95bn default have said they are prepared to give Buenos Aires extra time to settle, but only if the country negotiates in good faith, the Financial Times reported. Argentine officials met in New York on Monday with a mediator in the dispute. The country needs to reach a rapid deal with holdouts if it is to avoid a second default. Under a US court ruling, Argentina cannot service its restructured bonds unless it also settles with the holdouts in full.