Saturday, August 2, 2014

Argentina: Buenos Aires Can Use Whatever Rhetoric it Wishes: ISDA Says Country is in Default!

According to The Latin American Tribune, the International Swaps and Derivatives Association, Inc. (ISDA) today (August 1) ruled that Argentina's default was a "failure to pay credit event."

The ISDA "Americas Credit Derivatives Determinations Committee resolved that a failure to pay credit event occurred in respect of the Argentine Republic," ISDA said in a statement.

The 15-member committee voted unanimously that Argentina was in default and that it would trigger payment of $1 billion in Credit Default Swaps (CDS), which investors buy as insurance to protect against such an inevitability.

Argentina failed to get a $539 million dollar interest payment due June 30, on its restructured debt to bondholders. Argentina had a 30 day grace period to cure the failure but did not do so.

Argentina is the first nation to trigger the CDS since Greece triggered about $3 billion in 2012.

The Depository Trust Company (DTC) reports that there are approximately 2,652 CDS contracts totalling almost $1 billion protecting against Argentina default.

Elliot Management, which is the hedge fund that obtained a ruling against Argentina that pushed it into default is one of the 15 members of the CDS committee that voted today.

COMMENT: "The Committee also resolved to hold an auction in respect of outstanding CDS transactions," ISDA reported.
 
Established in 1985, ISDA has over 800 member institutions from 64 countries. These members include a broad range of OTC derivatives market participants including corporations, investment managers, government and supranational entities, insurance companies, energy and commodities firms, and international and regional banks. 
 
In addition to market participants, members also include key components of the derivatives market infrastructure including exchanges, clearing houses and repositories, as well as law firms, accounting firms and other service providers.