"Barings tried for years to reach a settlement on the debt, repeatedly sending representatives to Buenos Aires, but it was not until 1857 – 29 years after the default -- that Barings and bondholders (backed by the threat of some stiff English gunpowder diplomacy) reached a settlement with what was now the Republic of Argentina -- by issuing new bonds, of course.
And with Argentina’s credit now restored with a £1.6 million Barings recapitalization of the arrears, Barings went on to market another £550,000 for Argentina in the first portion of a £2,500,000 33 year Argentina 6% bond maturing in 1899 and even more issuance followed.
By 1890, however, Argentina was on the brink of default again and almost took Barings down with it. With the Bank of England becoming the world’s lender of last resort, it was Baring’s old rival, Rothschild, who would persuade the British government to put together what became a £17 million rescue on the principle that the collapse of Barings would be a “terrific calamity for English commerce all over the world.” [LAHT]
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COMMENT
The world of bonds/debt and investment seems to have:
* a villain (defaulting debtor)What seems to happen is that someone comes along (a group of big investors or a goverment) and offers a bail-out and restructured terms ... and the debt carries over in some shape or other.
* a victim (investor)
* a rescuer (financial group or even foreign government bank)
If nations that are indebted aren't careful, they stand to lose territory (and maybe even sovereignty), is what I got out of it.
So that maybe explains why people are prepared to continue to invest in a 'bad' lender. Countries have value: resources, territory, strategic location etc.
What's going to happen? I'm guessing there's going to be a buy-out and restructuring on terms that probably aren't favourable to Argentina?
But having read about the 65% 'haircut' or whatever it was, it doesn't sound like the terms are all that great for the lenders. But it depends on how you view profits, I guess. In other words, how much profit is enough profit?
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