Default it is, is it not?

ARGENTINA - In Brief 31 Jul 2014 by Esteban Fernandez Medrano

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The fact that the Economic Minister, Axel Kiciloff, joined yesterday the Argentine negotiation team and that local banks declared that they are willing to make an offer to buy Holdout’s legal claims, suggested that the likelihood of a temporary agreement to reinstall the “stay order” until the end of the year was closer than it seemed over the last weeks. Therefore the result of Kiciloffs negotiation meeting, later that day, where he stated that no agreement was achieved, added to the news that local banks dropped off from the negotiations with holdouts, was disappointing, now suggesting that a formal default was imminent. According to the press, Argentina’s luck to avoid this fate at the last minute lies now in the hands of some international banks, which are also negotiating to buy the legal claims from Holdouts. If the transaction is accepted by Holdouts, those financial institutions would request that the stay to be implemented so as to negotiate early next year the payment of those legal claims with the government. For the time being a default seems to be the more likely outcome and tomorrow at 11am Griesa called for an audience to analyses how to proceed after the failed negotiations. At around the same time the International Swaps and Derivatives Association (ISDA) is expected to evaluate the request of CDS holders and announce that an actual default happened and that the CDS have to be paid. That might be the actual deadline for the alleged negotiations with US banks. But even assuming that such a negotiated outcome is found over the next hours, what is the government’s likely negotiation position forward looking? Is the usage of the RUFO a concrete fear or jus...