Bond investors who think Argentina’s decade-long battle over its defaulted debt will end when a new government takes over will probably be disappointed once more, according to Elliott Management’s Jay Newman.
Investors bet the nation’s legal dispute with holders of bonds from its 2001 default would be settled by the U.S. Supreme Court, but it declined in June 2014 to the review the case, the money manager said in an interview with Bloomberg Television. Then, he said, they suffered a setback in July when the grace period expired for bonds maturing in 2033. And they were let down again at the beginning of the year when talks between Argentina and holdouts didn’t resume after a key bond clause expired, Newman said.
Argentina’s international dollar bonds have gained 25 percent in the past year, the most in emerging markets, according to JPMorgan Chase & Co.’s EMBI Global Diversified indexes. Investors are speculating that a regime change after the October presidential elections will improve the country’s economic imbalances and that the new administration will settle with holdout creditors.
The South American nation’s sale of $1.4 billion of bonds governed by local law on April 21 was a loss for everyone involved, Newman said. Argentina paid 8.96 percent, or almost double the borrowing costs of its neighbors, while holders of defaulted debt suffered “because we’re not a step close to negotiation,” Newman said.
Economy Ministry spokeswoman Jesica Rey didn’t immediately reply to a message from Bloomberg seeking comment.

‘Bonds in Default’

Investors in the country’s bonds sold in the 2005 and 2010 debt swaps also lost out because Economy Minister Axel Kicillof “is happy to leave their bonds in default,” Newman said.
Argentina sold the 2024 bonds in the local market as litigation with creditors led by billionaire Elliott Management prevented the country from servicing international bonds without also paying defaulted debt, which it refuses to do.
“Every time Argentina has a loophole to exploit, it gives them a false sense of optimism that they can avoid forever dealing with creditors, and that’s completely unrealistic,” Newman said.