In finance circles it has been called ‘the trial of the century,’ and it’s almost over. Argentina’s 15-year dispute with hedge funds dates back to its debt default back in 2001, but with an end in sight.
The country is set to return to the international credit markets. Joel Richards has this report from Buenos Aires.
Argentina's 'trail of the century' nears its endIn finance circles it has been called 'the trial of the century,' and it's almost over. Argentina's 15-year dispute with hedge funds dates back to its debt default back in 2001, but with an end in sight. The country is set to return to the international credit markets. Joel Richards has this report from Buenos Aires.
After the controversy, the debates and switching allegiances, Argentina’s Congress voted almost 2 to 1 this week to settle the 15-year stalemate. It’ll cost Argentina $4.65 billion, but deal’s approval was still a major victory for recently elected president Mauricio Macri.
In 2001, Argentina defaulted on its sovereign bonds. Four years later, most of the bondholders accepted what bankers call a “haircut” – and it was steep. Argentina paid them around 30 cents on the dollar.
But a small group of creditors – including a group of Italian investors and six U.S. hedge funds – demanded full repayment on the defaulted bonds. They became known as “holdouts” or “vulture funds.”
The Kirchner government refused to pay. But their holdout strategy paid off. Argentina will load up $12 billion of debt to pay the hedge funds. Protestors outside Congress believe it is all too reminiscent of the policies that put this country in this position in the first place.
Earlier this week, Argentina Some economists – including those who campaigned against Macri before the elections – concede there was little alternative.
Argentina will pay some of the holdouts up to 150 percent of the bond’s principal value. The funds grumble it’s not enough. Many Argentines say it’s too much.
The final vote to approve the bill to will be later this month in the Senate. Argentina has until April 14th to pay off the hedge funds. Joel Richards, CCTV, Buenos Aires>