How Costly Would Argentine Default Be?

Default on Argentina's bonds may trigger $29 billion in claims, as much as all its foreign-currency reserves.

By defaulting tomorrow, Argentina may trigger bondholder claims of as much as $29 billion—equal to all its foreign-currency reserves.

If the overdue interest on Argentina’s dollar-denominated securities due 2033 isn’t paid by July 30, provisions in bond indentures known as cross-default clauses would allow the nation’s other debt holders to also demand their money back immediately. The amount corresponds to Argentina’s debt issued in foreign currencies and governed by international laws.

In a meeting last week with court-appointed mediator Daniel Pollack, Argentina called on the judge to create a safeguard against risks related to the RUFO clause, which the country has said may trigger claims of more than $120 billion. Griesa has rejected Argentina’s repeated pleas for a delay.

Credit-default swaps that protect against losses from an Argentine default over the next three months imply a 43 percent chance of non-payment, according to data compiled by CMA. The South American nation’s debt is the most expensive in the world to protect with the swaps.

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