Buenos Aires, Argentina (4E) – Argentina blamed the U.S. for defaulting on some of its bonds Wednesday because U.S. courts prevented it from paying creditors unless it first settles $1.5 billion in interest to holdout bondholders.
Argentine President Cristina Kirchner’s cabinet chief, Jorge Capitanich, called U.S. District Judge Thomas Griesa and court-appointed mediator Dan Pollack “incompetent” and suggested they were agents of the U.S. hedge funds that obtained an order from the judge in 2012 that they be paid first before the creditors who bought restructured Argentina debts in 2005 and 2010.
Capitanich also called the hedge funds “vultures” for trying to make a big profit amid Argentina’s continuing debt problem.
Capitanich made the scathing remarks after his last-minute talks with the bond-holders in New York failed.
NML Capital and Aurelius Capital Management, which bought Argentina debts at low prices in 2001, wanted full payment of their holding while other creditors agreed to be paid less than a third of what they were originally owed.
Capitanich threatened to sue the U.S. before the International Court of Justice in The Hague as ratings agency Standard & Poor’s placed Argentina in “selective default.”
Argentina deposited the $539 million in interest payments due its creditors last month with bond trustee The Bank of New York Mellon, but Griesa blocked its distribution to investors last month to force Argentina to comply with his ruling to also pay hedge funds that sued to collect on bonds the country stopped paying in 2001. Argentina refused to comply with the ruling fearing that paying the holdouts would trigger billions of dollars in additional claims.
Argentina’s economy minister, Axel Kicillof met the holdouts for the first time in New York this week but said Wednesday that they rejected an offer he made, according to CNN Money.
The default, the third time in Argentina in 25 years, lowers the country’s credit rating thus increasing the country’s borrowing costs, which in turn could force the country to devalue its currency to preserve U.S. dollar reserves and trigger a dangerous rise in inflation now nearing 40 percent. The Argentina peso already lost 25 percent of its value against the dollar this year.