Weekend Economists in the Children's Hour: Hallowe'en to El Dia de Los Muertos, 2014

[xchrom]

46. The Hot New Threat To Argentina — 'Acceleration'

http://www.businessinsider.com/new-threat-to-argentina-is-acceleration-2014-10

After a whipsaw summer that included the close of a decade-long lawsuit, a technical default, the most dramatic of political theatrics, and a contempt ruling from a US court — things have been relatively silent out of Argentina.

But some rumblings out of Wall Street indicate that there could be a change afoot. One word — "acceleration" — threatens to force an end to the stalemate between Buenos Aires and its creditors that has been in place since the country went into default this summer.

Acceleration is the nuclear option. It is the ultimate expression of the collective belief that Argentina will not pay bondholders. With acceleration, all bondholders call in their entire debt immediately. In its fullest expression, that amount in the tens of billions of dollars — far greater than what Argentina, with only $28 billion in its central bank reserves, can pay.

The country went into default this summer for refusing to pay a group of holdout bondholders led by Paul Singer of Elliott Management. For years the holdouts insisted on being paid 100 cents on the dollar for Argentine bonds dating back to the country's 2001 default. They argued that all bondholders, regardless of whether they had accepted a haircut on their debt, should be paid equally. That argument won, but Argentina did not care.



Read more: http://www.businessinsider.com/new-threat-to-argentina-is-acceleration-2014-10#ixzz3HoxrtZDR