Argentina Default Triggers $1 Billion of Swaps After ISDA Ruling
By Abigail Moses Aug 2, 2014 2:04 AM ET
Argentina’s failure to pay interest on its bonds is a credit event that will trigger settlement of $1 billion of default insurance, according to the International Swaps and Derivatives Association.
ISDA’s determinations committee made the ruling in response to a question posed by Swiss bank UBS AG after the government missed a July 30 payment deadline on $539 million of interest. Argentina is the first nation to trigger default swaps since Greece restructured its debt in 2012.
The ruling was seen by traders as complicated because Argentina made the required payment to the trustee for the bond, Bank of New York Mellon Corp. The bank said yesterday that a U.S. judge’s ruling bars it from passing the money to bondholders without a resolution of the nation’s dispute with hedge funds led by Elliott Management Corp., which sued the nation for $1.5 billion.
“From the perspective of Argentina, you could argue they provided the payments and the transfer mechanism doesn’t work,” said Jochen Felsenheimer, the Munich-based founder of XAIA Investment GmbH, which manages 2.8 billion euros ($3.76 billion) in credit funds. “From the investor standpoint, you can argue they didn’t get the coupon.”
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Binding Decisions
ISDA’s determinations committee was formed in 2009 and makes binding decisions for the market on whether contracts can be triggered. The 15-member group includes representatives from Bank of America Corp., Elliott Management, Morgan Stanley and JPMorgan Chase and Co.
There were 2,652 contracts covering $1 billion of Argentina bonds as of July 25, according to the Depository Trust and Clearing Corp. That compares with about $3 billion for Greek bonds when they were triggered in 2012 and $20 billion on Italy’s as of last week.
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http://www.bloomberg.com/news/2014-08-01/argentina-default-triggers-1-billion-of-swaps-after-isda-ruling.htmll
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Argentina made the payment.
Bank of New York Mellon Corp didn't make the transfer.
Judge's ruling bars the bank.
Perhaps the State should pay the insurance then, because the matter isn't resolved.
One would think there would be avenues of appeal?
ISDA (
International Swaps and Derivatives Association) make binding decisions ...but is ISDA impartial? Is it supposed to be?
Check out the $20 billion bonds associated with Italy!! That looks an interesting story.
