30 June 2014
Last updated at 21:12
“Argentina or vulture funds”: the anti-hedge fund mood on the streets of Buenos Aires
Argentina is expected to miss a bond interest payment on Monday that will risk sending the country into default.
If it does, the country then has a 30-day grace period to make the payment to avoid its second default in 13 years.
Argentina owes money to two sets of bondholders – those who have agreed a deal to restructure its debt, and hedge funds which want full settlement of the debt.
US courts have ruled Argentina cannot pay one group unless it pays the other.
The hedge funds – dubbed “vulture funds” because they bought Argentine government bonds at a big discount after the country’s 2001 default – say the country is now refusing to negotiate.
“Argentina’s government has chosen to put the country on the brink of default. We sincerely hope it reconsiders this dead-end path,” wrote Jay Newman, senior portfolio manager at Elliott Management, which runs NML Capital, one of the bond holders which wants a full settlement.
Last week, Argentina tried to make a payment to the individual bond holders who had agreed a deal.
But on Friday a US judge ruled that this attempt was “illegal” and said the money should be returned. The judge said Argentina was not allowed to make payments to one group of creditors unless it also paid the other.
Earlier this month, the US Supreme Court ruled that Argentina must pay the hedge funds that had refused to participate in the debt restructuring deal the full $1.3bn (£766m) value of the debt.
The Argentine government has been in a 12-year legal battle in US courts, arguing that the hedge funds are engaging in blatant profiteering.