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| Argentina settles creditor dispute with $4.6bn deal after marathon negotiation | Argentina settles creditor dispute with $4.6bn deal after marathon negotiation |
| (6 months later) | |
| Argentina’s new president, Mauricio Macri, struck a $4.65bn agreement with the US creditors on Monday, ending a 15-year debt dispute between Argentina and a number of holdouts led by US billionaire financier Paul Singer. | Argentina’s new president, Mauricio Macri, struck a $4.65bn agreement with the US creditors on Monday, ending a 15-year debt dispute between Argentina and a number of holdouts led by US billionaire financier Paul Singer. |
| The settlement was mediated by US attorney Daniel Pollack, appointed by New York judge Thomas Griesa to find a solution to legal action brought by investors who refused to settle their losses after the country’s disastrous 2001 foreign debt default. | The settlement was mediated by US attorney Daniel Pollack, appointed by New York judge Thomas Griesa to find a solution to legal action brought by investors who refused to settle their losses after the country’s disastrous 2001 foreign debt default. |
| The deal was made possible by a “course-correction for Argentina that was nothing short of heroic”, said Pollack. It came after a marathon weekend negotiation between Argentinian officials and the holdouts that lasted up to midnight both Saturday and Sunday. | The deal was made possible by a “course-correction for Argentina that was nothing short of heroic”, said Pollack. It came after a marathon weekend negotiation between Argentinian officials and the holdouts that lasted up to midnight both Saturday and Sunday. |
| The mediator was referring to the hardened refusal by Argentina’s previous president, Cristina Fernández de Kirchner, to pay the holdouts, despite a 2012 ruling by Griesa in favour of bondholders. | The mediator was referring to the hardened refusal by Argentina’s previous president, Cristina Fernández de Kirchner, to pay the holdouts, despite a 2012 ruling by Griesa in favour of bondholders. |
| Former president Fernández, who stepped down last December, called the holdouts “vultures” and “financial terrorists” during previous rounds of negotiations also mediated by Pollack, sending the country into technical default in July 2014. | Former president Fernández, who stepped down last December, called the holdouts “vultures” and “financial terrorists” during previous rounds of negotiations also mediated by Pollack, sending the country into technical default in July 2014. |
| Following Argentina’s dramatic economic collapse in 2001, when the country defaulted on its giant $82bn foreign debt, the largest default in world history until that date, Argentina reached an agreement with 93% of its creditors for a “haircut” on the money owed them. | Following Argentina’s dramatic economic collapse in 2001, when the country defaulted on its giant $82bn foreign debt, the largest default in world history until that date, Argentina reached an agreement with 93% of its creditors for a “haircut” on the money owed them. |
| But Singer and other holdouts took Argentina to court in the US demanding full repayment, obtaining a favourable ruling from Griesa in a ruling confirmed by the US supreme court in 2014. | But Singer and other holdouts took Argentina to court in the US demanding full repayment, obtaining a favourable ruling from Griesa in a ruling confirmed by the US supreme court in 2014. |
| The agreement between Argentina and its holdout creditors still needs to be approved by Argentina’s congress before it is finally clinched. The Argentinian president must first ask congress to overturn two laws that prevent payments to the holdouts. | The agreement between Argentina and its holdout creditors still needs to be approved by Argentina’s congress before it is finally clinched. The Argentinian president must first ask congress to overturn two laws that prevent payments to the holdouts. |
| One law passed in 2005 prevents Argentina from paying the holdouts more than it paid the original creditors who took the “haircut”, while the other law, passed by Fernández in 2014 at the height of her verbal and legal war with the “vultures”, prevents Argentina from making payments outside the Argentinian financial system. | One law passed in 2005 prevents Argentina from paying the holdouts more than it paid the original creditors who took the “haircut”, while the other law, passed by Fernández in 2014 at the height of her verbal and legal war with the “vultures”, prevents Argentina from making payments outside the Argentinian financial system. |
| Observers believe congress will overturn both laws during March, paving the way for Argentina to settle its outstanding debt before the 14 April deadline set in the agreement. | Observers believe congress will overturn both laws during March, paving the way for Argentina to settle its outstanding debt before the 14 April deadline set in the agreement. |
| Although Macri does not hold a majority in either house of congress his administration has been seeking alliances to smooth overturning the two laws. | Although Macri does not hold a majority in either house of congress his administration has been seeking alliances to smooth overturning the two laws. |
| If approved, the deal will be a major win for Macri. It opens the door to badly needed international credit to beef up Argentina’s central bank reserves, which are estimated to be precariously low, and smooths the path for international investment, which had fallen during the economically tumultuous Fernández administration. | If approved, the deal will be a major win for Macri. It opens the door to badly needed international credit to beef up Argentina’s central bank reserves, which are estimated to be precariously low, and smooths the path for international investment, which had fallen during the economically tumultuous Fernández administration. |
| Argentina’s economy minister, Alfonso Prat-Gay, has already announced the country will emit $15bn in bonds to meet the payment to the holdouts. | Argentina’s economy minister, Alfonso Prat-Gay, has already announced the country will emit $15bn in bonds to meet the payment to the holdouts. |