Debt rating agency Standard & Poor’s deemed Argentina to be in selective default after frantic last-minute talks ended in deadlock late last night. This will put even more pressure on the country’s already struggling economy as its borrowing costs are likely to increase.
Problems stem from a legal battle with a small group of “holdout” creditors that demanded payment of $1.5 billion on bonds they bought after the $144 billion default in 2001. This standoff blocked payments to other creditors. 93% of the cretiors reached an agreement to restructure the country’s debt but 7% of the “holdout” bondholders refused to accept.
Argentina’s Economy Minister Axel Kicillof tried to make an offer to this small group of creditors in New York this week however no deal was struck leading to default. Investors had been getting ready for bad news, however Bloomberg News reported that all remaining hopes were dashed when the hedge funds holding its debt, including billionaire Paul Singer’s Elliott Management, couldn’t strike a deal with a court-appointed mediator.