Argentina has just hours to avoid a second debt default in 13 years that could plunge the country into turmoil.
Under a US court order, Argentina has to pay certain hedge funds demanding full payment on defaulted bonds till this midnight or risk being declared in default.
If that happens, “the debt restructuring principles and the efficiency” of collective-action clauses “will have to be reviewed. Collective-action clauses – including when a government issues bonds – traditionally allow a majority of creditors to agree to a debt restructuring when the country is facing a crisis.
But under the US judge’s ruling, it cannot pay its other creditors without also paying hedge funds which did not agree to the debt restructuring. If Argentina pays the so-called “holdout” hedge funds 100% of the $1.3 billion it owes them, it could be forced to pay all remaining creditors in full, as well, under the restructuring deal.
