As the clock ticked past midnight in New York without a legal stay or eleventh-hour deal, Argentina was in technical default on its national debt — its second default in 13 years.
Argentine stock markets are expected to be rocked Thursday morning by the news — as 18 hours of talks over the past two days between the embattled country and a group of holdout bondholders failed to reach a deal.
Argentina has been ordered to pay the group of holdouts — led by New York hedge fund billionaire Paul Singer — $1.65 billion but the country claims it doesn’t have the cash or legal authority to do so.
The country wants to pay its regular, or exchange, bondholders the $539 million in interest it owed them as of midnight Wednesday — and in fact deposited the cash with Bank of New York Mellon — but a Manhattan federal judge has ruled it can’t disperse the cash to the bondholders unless Argentina pays the Singer group, too.
Argentina has called Singer’s group a bunch of “vultures” and vowed never to pay them a dime. That is what set up the dramatic midnight default.
While there are no more settlement talks scheduled, the judge can always order a stay (a group of regular bondholders has requested such a move) or the two sides can meet Thursday and reach a deal.
Meanwhile, though, no such deal exists so Argentina stands in technical default this early Thursday morning — and stock markets in Buenos Aires will be on guard for a possible massive sell-off when they open later today.