United States

Argentina’s debt saga has been dragging on for more than 12 years and, with the country slipping back into default on Wednesday, it is far from over. Hopes remain that a deal with the private sector can still be reached, the Financial Times reported. A last-minute proposal by a group of Argentine banks collapsed behind the scenes shortly after economy minister Axel Kicillof announced that the “vulture funds” had rejected the government’s offer. But other proposals are in the works, according to local media.

Talks aimed at a last-minute settlement between Argentina and holdout creditors collapsed late Wednesday, and a court-appointed mediator said the country would "imminently" be in default, The Wall Street Journal reported. At a news conference after talks with the mediator ended, Argentine Economy Minister Axel Kicillof, who had led the country's delegation to New York, said "we won´t sign an agreement that would compromise Argentina´s future." A spokeswoman later said negotiations would continue, without giving a timetable. The likely default would be Argentina's second in 13 years.

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.

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.

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.

Argentina will not make a formal offer to settle its dispute with holdout investors in its sovereign debt at its meeting on Monday with a court-appointed mediator, an Argentine daily wrote on Saturday, citing Economy Ministry sources. After a string of adverse U.S. court decisions, Argentina has until the end of July to settle with a group of creditors who refused to accept the terms of its restructurings following its 2002 default on $100 billion of debt.

Bank of New York Mellon Corp. must return a $539 million deposit from Argentina intended for restructured bondholders, a U.S. judge ruled, calling the transfer an “explosive action” that disrupted potential settlement talks with holders of defaulted debt, Bloomberg News reported. U.S. District Judge Thomas Griesa in New York has ruled that Argentina can’t pay holders of its restructured debt without also paying more than $1.5 billion to a group of defaulted bondholders, raising the possibility of a new default as the South American nation approaches a June 30 payment deadline.

Governments have a long history of borrowing abroad and not repaying their debts. The first recorded sovereign default was in the 4th century BC when ten Greek cities failed to honour loans from the temple of Delos. Yet there are still no clear rules governing what happens when sovereigns do not pay up, The Economist reported. The murkiness was highlighted this week when Argentina seemed to offer, under duress, to negotiate with the 8% of its bondholders who refused to accept any losses after a huge default in 2001.