Argentina to investigate holdouts’ investments
Argentina’s markets watchdog on Monday launched an investigation into what it believes may have been unlawful speculation by holdout creditors whose litigation against the country for repayment of their defaulted bonds pushed it into a new default last week.
The head of Argentina’s Securities Commission Alejandro Vanoli said it had asked its U.S. counterpart for information on trade of Argentina’s sovereign debt and credit default swaps (CDS), derivatives used to insure against default.
The watchdog wanted to check if holdouts who rejected Argentina’s restructuring in the wake of its 2002 default held or traded CDS while they took part in negotiations with Argentina which could trigger a default.
Over nearly the last two years, sources familiar with the position of the holdouts have told Reuters the firms are not holders of CDS positions. A new source said on Monday that this stance has not changed.
Argentina missed a deadline at midnight last Wednesday to make a coupon payment on a restructured bond after failing to reach a deal with holdouts. A U.S. court had ruled Argentina could only service its exchange bonds if it at the same time paid holdouts in full their defaulted debt.
On Friday, a committee facilitated by the International Swaps and Derivatives Association voted unanimously to call the missed coupon payment a “credit event”, triggering a payout process on CDS worth an estimated $1 billion.
This default strikes a contrast to the last one in 2002, which occurred during an economic and financial meltdown that plunged millions into poverty and saw dozens killed in riots.
Source: Reuters
