Another Argentine Default, Round of Economic Chaos Imminent?

Argentina appears to be (again) spiraling downward from a credit-ratings perspective with few expresses optimism on its behalf.

Argentina missed bond payment due date, related to previous restructuring of sovereign debt, on June 30 worth to a tune exceeding $500 million (USD). Argentina recently tried to negotiate with creditors, including US hedge fund management groups, to no avail. It also suffered a legal setback as a US-based judge ruled that some payments it was making to other bondholders were, in fact, illegal.  With the likelihood of an amicable resolution fading, Standard & Poor’s placed Argentina’s already poor long- and short-term foreign currency sovereign Credit ratings into negative watch territory. S&P characterized the chances of Argentina fixing its payment issue within a designated grace period as a 50-50 proposition, at best. The nation’s foreign currency credit ratings would also be downgraded if it does not pay delinquent interest on the bonds in question, SNP said. If it can’t reach agreements, the ratings agency will consider Argentina in “selective default.”

Kevin Hebner, ‎senior FX Strategist at JPMorgan, said while serving as an instructor at the inaugural year of NACM's Graduate School of Credit and Financial Management International (GSCFMI) that Argentina has become a red hot topic in international business and finance of late, more so even than volatile matters in the Middle East and Eastern Europe. “The number one question we get asked is how to get money out of Argentina,” Hebner said. “There’s no reason to believe things will get better.”

- Brian Shappell, CBA, CICP, NACM staff writer

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